Monday Morning Livestock Market Update - Government Shutdown Averted; Futures Likely to Bounce

GENERAL COMMENTS:

The big news is the government averted a shutdown, which means business as usual. The industry had a sigh of relief as a shutdown might have had a significant impact on government reporting and pricing. However, now there is another new deadline of Nov. 15 when the markets likely will see the potential again. Cattle took a beating last week with feeder cattle seeing the most pressure. December live cattle futures were down $3.42 for the week with November feeder cattle down $8.62. This has done some significant chart damage, from which it may be difficult to recover with cash steady to lower last week and boxed beef weakness. Choice cuts were down $0.73 with select down $1.40 Friday. Reduced slaughter has moved packers into a more advantageous position for purchasing cattle. The Commitment of Traders report showed funds increasing their long futures positions 1,391 contracts, bringing their net-long positions to 103,763 futures. Feeder cattle long positions were reduced by 3,383 contracts, bringing their net-long positions to 12,260 contracts.

December and later hog contracts retested support from earlier in the week pressured by the bearishness of the Hog & Pigs report and the looming government shutdown. Now that the shutdown is off the table for a little while, futures may rebound as funds may step back into the market. Cutouts might provide some support as they were $0.31 higher Friday, the first gain for the week. However, further weakness of cash may limit the gains as the National Direct Afternoon Hog report showed a loss of $1.20. Packers are not expected to be aggressive Monday, but likely will wait and see how weekend demand fared. The Commitment of Traders report showed funds selling 8,325 futures contracts, reducing their net-long futures positions to 32,368 contracts.

	BULL SIDE		BEAR SIDE
1)	The government averted a shutdown, which should result in traders being more interested in buying back into the market.	1)	Cattle futures may have run its course for now as the market moved too high, too fast. Price may have found a level at which demand slowed, providing packers the opportunity to reduce slaughter.
2)	This is the beginning of a new quarter, which may increase the interest of funds to add to their long positions due to strong fundamentals.	2)	High prices cure high prices; the market may have reached that level.
3)	The hog market may have been overdone to the downside Friday, which could increase trader buying interest as traders breathe a sigh of relief.	3)	Hog weights increased last week to a 280.3-pound average, which is the same as a year ago.
4)	Lower prices should improve demand as consumers may increase pork consumption as they look for a less-expensive alternative to high-priced beef.	4)	Follow-through selling Mondday would move futures below recent technical support. A close below that level would open the way for the market to test the August support level about $1.00 lower.