GENERAL COMMENTS
There has been a generally bullish theme to the livestock prices this week as livestock owners pressed the advantage of a short supply situation, with the beef herd diminished by drought and with the supply of market-ready hogs staying current during a traditionally high-volume season. The Nov. 1 Cattle on Feed report showed only 11.7 million head in feedlots. At 98% of last year's Nov. 1 number, this result is even more bullish than pre-report expectations and will lend support to the recent gains in the deferred futures markets. The cash cattle market had a positive week, with most Southern live business transacted at $151 to $152, or $1 to $2 higher than a week ago. In Nebraska and Iowa, live prices ranged from $152 to $155 and dressed deals ranged anywhere from $236 to $244, so the weighted average is mostly steady with last week. On the National Direct Afternoon Hog Report, negotiated prices were down $1.46 to a weighted average price of $81.81 with prices ranging from $77 to $90 on 4,746 head, and the five-day rolling average was $84.74 per cwt. December corn moved up 1/4 cent to $6.67 3/4 per bushel and December soybean meal closed up $4.70 per ton to $410.40. The Dow Jones Industrial Average was up 199.37 points and the NASDAQ was down 0.16 points.
From Friday to Friday, livestock futures scored the following changes: December live cattle up $1.55, February live cattle up $2.60, January feeder cattle up $2.20, March feeder cattle up $1.975, December lean hogs down $0.125, February lean hogs up $1.15, December corn up 9 3/4 cents, March corn up 7 cents.
LIVE CATTLE:
The expectation leading into the November Cattle on Feed report had been bullish, keeping futures prices churning higher during recent trading sessions, and when the official number was released after Friday's market close, it did not disappoint those bulls. The December contract ended up $0.325 at $153.075; the February contract ended up $0.45 at $155.85, and the April contract ended up $0.35 at $159.25. After the lowest October placements number since records began in 1996, on Nov. 1, there were only 11.7 million head of cattle in large feedlots, which is 2% below the inventory from a year ago. Pre-report expectations were for a drop of only 1.7%, so this Cattle on Feed report should be seen as a reward to the market bulls who have been supporters of live cattle futures prices recently. They're also backed by a cash market that paid up this week to keep the lines running as the industry goes into a high-volume season. Southern live deals this week were $1 to $2 higher than last week, and Northern dressed deals were mostly marked at a weighted average of $242 per cwt, steady with last week.
Boxed beef prices were mixed Friday afternoon: choice down $2.23 ($254.87) and select up $1.09 ($232.83), narrowing the spread, with a movement of 121 loads (52.15 loads of choice, 12.72 loads of select, 9.21 loads of trim and 46.96 loads of ground beef).
MONDAY'S CASH CATTLE CALL: Higher. With the Cattle on Feed report spelling out the long-term supply-and-demand situation in clear black and white figures, the overall tone of the cattle market will remain in place, and feedlots may feel emboldened when setting their asking prices.
FEEDER CATTLE:
Feeder cattle futures posted significant gains Friday, although not large enough to exceed last week's high on the nearby January chart, for instance. At Friday's close, the January contract was up $0.80 at $180.775, the March contract was up $0.625 at $183.125, and the April contract was up $0.325 at $186.10. Snow forecasts over the weekend might touch North Dakota again but otherwise leave cattle country's logistics situation mostly clear as feedlots bring in calves from the fall run. Demand has been characterized as "good" at pretty much every sale barn, with prices for 500-600 lb steers reliably above $2 per cwt in the North. In more southern states, buyers may have concerns about health and quality after the widespread drought conditions stressed calves during their early months, and prices reflect that discount. There is no overall surplus of calves, though, as documented in the Cattle on Feed report, which showed monthly placements were down 6% compared to a year ago, and only 2.11 million head were brought into feedlots in October. The market, therefore, is likely to stay supported.
LEAN HOGS:
Losses in some lean hog futures contracts extended to triple digits by the end of Friday's session, but coming after a multi-day streak of gains, most charts were still showing overall weekly improvement. The December contract closed down $0.75 at $84.225; the February contract closed down $1.25 at $89.55; and the April contract closed down $1.075 at $94.925. Packers' willingness to pay for the relatively current supply of market-weight hogs likely sparked the recent upward trend in prices, particularly leading into a traditionally high-volume season of meat production, but the slaughter pace has been able to increase this week (2.438 million head of hogs week-to-date, with another 167,000 head projected for Saturday), suggesting packers are finding what they need. Meat features at the grocery stores should be active leading into Thanksgiving week but will mostly highlight turkey (even imported turkey) instead of ham, despite turkey's recent record high prices. At Walmart.com, for instance, Butterball smoked fully-cooked turkey breast at $3.57 per lb outcompetes Sam's Choice boneless spiral honey ham at $4.48 per lb. The afternoon pork cut-out showed the overall carcass value up $0.81 to $93.44. There were 337.16 total loads (310.52 loads of cuts and 26.64 loads of trim). The CME Lean Hog Index for Nov. 16: down $0.08, $88.14.
MONDAY'S CASH HOG CALL: Steady to $1 higher. Packers may have an appetite to bring in supply early in the holiday-shortened week.
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