GENERAL COMMENTS:
Moderate to strong gains developed in most live cattle and feeder futures early Tuesday morning. Active support focusing on the upward moves seen early in the week and underlying buy orders developing across the complex pushed prices $2 to $3 per cwt higher during the first couple hours of trade. At midday, a moderate to firm price correction developed following news coverage of analyst estimates for Friday's Cattle on Feed Report. This quickly cut early gains in half or more in most contracts, causing some concern that follow-through pressure may develop even before the report is released Friday.
Hog futures slipped lower in light to moderate trade, as traders backed away from previous gains, but left the market in a generally sideways market structure. Hog prices closed lower on the Daily Direct Afternoon hog report, down $2.28 with a weighted average of $63.81 on 3,874 hogs. December corn closed up 1 at $4.783 and December soybean meal closed up $4.50 at $473.60. The Dow Jones Industrial Average is up 489.83 at 34,827.70.
LIVE CATTLE:
Live cattle futures traded higher through the entire Tuesday session with all but spot December contracts closing with gains over $1 per cwt. Early trade quickly pushed prices $2 to $3 per cwt higher as active buyer support quickly moved into the market. Once the Dow Jones Analyst estimate for the Cattle on Feed report was released Tuesday, price levels retracted a significant portion of these early day gains. Analysts estimate that total on feed numbers will be 102.1% last year levels. This would put on feed numbers as of Nov. 1 at 11.952 million head. For the next couple of days, traders will not only be trading this estimated number, but also focus on how any significant shift in these numbers in the actual report would impact price levels, partially taking into account potential market reactions. The fact that the October Cattle on Feed report seemingly disrupted market volatility in the cattle complex for nearly a month is keeping many traders extremely sensitive to report news.
Cash cattle markets remain at a standstill Tuesday afternoon with just a few asking prices starting to develop at $180 to $183 per cwt in the South. Bids remain quiet and may stay this way until later in the week. It is quite possible that active trade could be pushed off until late in the week, and potentially until after Friday's cattle on feed report.
December live cattle closed $0.93 higher at $175.85, February live cattle closed $1.63 higher at $176.875 and April live cattle closed $1.35 higher at $178.80.
Tuesday's slaughter is estimated at 126,000 head, 1,000 head more than a week ago and 3,000 head less than a year ago.
Boxed beef prices closed lower: choice down $2.18 ($295.67) and select down $1.36 ($267.88) with a movement of 144.19 loads (79.10 loads of choice, 29.23 loads of select, 11.58 loads of trim and 24.28 loads of ground beef).
WEDNESDAY'S CATTLE CALL: Steady. Despite the upward shift in futures trade, the uncertainty of market direction around and following Friday's Cattle on Feed report is likely to keep both sides cautious until later in the week.
FEEDER CATTLE:
November feeder cattle contracts closed lower, with limited trade and traders focusing on moving to the January contracts. The rest of the complex established higher prices, and were able to sustain these gains through the trading session.
The release of the Dow Jones Analyst estimate for the upcoming Cattle on feed report sparked a quick and abrupt market pullback at midday. The average estimate for cattle placed in feedyards wis 107.1% year-ago levels. Analyst confidence in this number is relatively low with a range from 102.7% to 108.1%, indicating there is very little consensus of where analysts feel October placements will land. This uncertainty is likely to add to market shifts through the entire week as traders adjusting positions in front of the report in the direction they feel market factors will best support. It is important to remember that last month's larger than expected placements sparked the market adjustment, of which the ripples are still being felt at this point. November feeders closed $0.68 lower at $230.05, January feeders closed $0.70 higher at $229.00. and March feeders closed $1.30 higher at $231.375. The CME Feeder Cattle Index for Nov.10: down $2.76, $228.64.
LEAN HOGS:
Lean hog futures eroded Tuesday with moderate pressure seen in nearby contracts through the entire session. December and February futures led the complex lower, although at this point, traders seem to be focusing on minor position adjustments, rather than establishing and setting a new range.
Monday's moves in spot contracts broke through short-term resistance levels, but given the lack of bullishness in both cash hog markets and pork values, traders seemed hesitant to feel that prices will be able to surge significantly higher in this market structure.
Currently, nearby contracts are well established within the current $3 per cwt price range, which could continue to contain market shifts in the near future, especially with the upcoming Thanksgiving Holiday typically limiting trade direction during late November.
December lean hogs closed $1.05 lower at $72.30, February lean hogs closed $1.10 lower at $75.925 and April lean hogs closed $0.85 lower at $81.775. Tuesday's hog slaughter is estimated at 484,000 head, 5,000 head less than a week ago and even with a year ago. Pork Cutouts totaled 303.19 loads with 253.95 loads of pork cuts and 49.24 loads of trim. Pork cutout values are up $0.83 at $87.60. The CME Lean Hog Index for Nov. 10: down $0.23, $76.05.
WEDNESDAY'S HOG CALL: Steady to $1 lower. The combined impact of futures market erosion, softness in cash early week cash hog values and pork cutout losses is expected to limit midweek cash hog prices as packers focus on reducing spending through the next couple of days, but still insuring adequate volume for weekly slaughter projections.
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