Monday Morning Livestock Market Summary - Mixed Trade Expected

 General Comments:

All good things come to an end and this certainly was the case with cattle over the past two weeks. After enjoying a period of nice high prices, the bottom fell out of the market with futures falling back to levels last seen in June. Unfortunately, the bottom may not have been found. The Cattle on Feed report did little to provide any support as continued large numbers remain. In fact, the inventory of cattle on Oct. 1 of 11.7 million head was the largest on record since information began being gathered in 1996. Cattle weights are also near record highs for this time of year, which is adding to the available tonnage of meat moving toward the end of the year. A positive aspect is that the Cold Storage report released last Thursday was somewhat neutral, indicating good demand is evident. Futures are oversold, but the bearish report Friday may keep it there longer.

Hog futures have now corrected an overbought market and may be ready to resume the uptrend that may have begun on Friday or at least found a level of support. Despite the rapidly expanding hog herd in China, demand has done well. December futures have been the recipient of the good demand while later futures contracts have reacted to the strong potential of slowing exports. The September Cold Storage report was friendly to some aspect of the market, but overall, it will need a bullish injection of news to provide further support. Hog contracts for 2021 are hugely oversold but may remain that way for a while.

	BULL SIDE		BEAR SIDE
1)	There is a strong possibility cattle futures have more than factored in the bearish Cattle on Feed report, which could result in higher futures. Livestock futures have a track record of moving in the opposite direction of a report.	1)	The bearish Cattle on Feed report may keep the downtrend intact. Packers are expected to begin the week with lower bids, seeing the amount of beef that will be coming to the market as well as continued weakness of futures.
2)	Cattle futures are oversold and ripe for a price bounce. Sellers may take profits now that the numbers of the Cattle on Feed report are known.	2)	Beef demand from the food service industry will continue to struggle especially in light of the resurgence of COVID-19 cases across the country. This may negatively impact boxed beef prices.
3)	Hogs should find support from a friendly Cold Storage report and the fact that it will take some time for China to rebuild its hog herd. This could be supported by expected strong demand through the end of the year.	3)	The strength of December futures compared to 2021 hog contracts indicates strong demand now, but greater bearishness next year. China is expected to import less pork as their herd increases.
4)	Futures are oversold and ready for a technical bounce, which may have begun on Friday.	4)	Technically, there is a gap in the price charts that will likely be filled before the sell-off will be complete. Those gaps are around another dollar lower.

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