Wednesday Morning Livestock Market Update - Futures Could Face Headwinds

GENERAL COMMENTS:

There was buying interest in cattle futures Tuesday, but the higher prices could not hold, falling back substantially from the highs. Futures may not have much upside potential ahead of the Cattle on Feed report Friday. There is anticipation of another hefty placement number. The average estimate for on-feed as of Nov. 1 is 102.1% compared to a year ago. Placements in October estimate is at 107.0% and marketed in October estimate is at 98.1%. The large placement number may keep trading activity subdued the rest of the week with traders likely day trading ahead of the report rather than guessing the direction. The placement number is a wild card. Boxed beef prices did not provide support with choice down $2.18 and select down $1.36. Cash cattle trade has yet to develop. Feeder cattle futures had a price swing of $4 to $5 as traders reacted to the desire for a price retracement and the potential bearishness of the upcoming report.

Hogs just could not find any reason to push above the trading range. Packers pulled back with bids Tuesday with the National Direct Afternoon report showing a $2.28 loss, pushing the weighted average down to $63.81. The continued weakness of cash is a concern which limits upside potential for futures. Fortunately, cutouts were higher with a gain of $0.83. Futures may remain entrenched in a sideways trading pattern with traders unwilling to take a long-term position.

	BULL SIDE		BEAR SIDE
1)	There may be further short-covering ahead of the Cattle on Feed report Friday, which could allow the market to retrace further.	1)	Cattle futures were unable to hold the highs, falling back substantially as traders are not convinced over price strength.
2)	Packers may be a little more aggressive as they want to procure sufficient cattle for the week and a good amount for next week due to the Thanksgiving holiday.	2)	Boxed beef prices continue to weaken, affecting the outlook for beef prices for the near term.
3)	Hogs should find support in the sideways range, keeping futures from retracing their gains. This may give traders confidence to hold positions.	3)	Cash hogs and product prices cannot find consistent and solid support.
4)	It looks like a government shutdown may be averted, which will keep the needed information flowing for industry reports.	4)	Hog futures could not break out of the sideways trading range, which may limit upside potential and keep prices choppy ahead of the holiday.