Wednesday Morning Livestock Market Update - Strength in Cattle Futures May Temper

GENERAL COMMENTS:

Feeder cattle again were the leaders Tuesday, but live cattle did not lag far behind. There has not been a significant change in boxed beef with prices mixed. Choice gained $1.51 while Select declined $3.54. It has been somewhat surprising that traders were as aggressive as they have been over the past three days. The anticipation of this week is for cash to be no better than steady with the potential for lower cash as the packers have some cattle already purchased ahead. Dressed cattle weights averaged 924.1 pounds last week, down 3.2 pounds from the previous week, but remain at record high levels. Weights are expected to decrease through the winter but still remain large. The Cattle on Feed report estimates are for on-feed Nov. 1 at 99.9%. October placements are estimated at 103.3%. Marketings in October are estimated at 105.1%.

Hog futures closed mixed Tuesday with pressure through the June contract and later contracts posting gains. There was no specific reason for this divergence as the gains and losses were minimal. However, the nearby contracts continued to struggle at the new lows on Tuesday, indicating the recent downtrend remains intact. The National Direct Afternoon Hog report showed further cash weakness with a decline of $0.83. Higher cash had been expected, but not realized. The packers should be more aggressive Wednesday as they increase ownership. Pork cutouts took a hit with values declining by $2.39. This may keep pressure on futures Wednesday as there is concern the strong demand may be tempering.

	BULL SIDE		BEAR SIDE
1)	Live cattle pushed above technical resistance, which may increase the buying interest of traders.	1)	Traders may temper their exuberance in cattle futures as they look ahead to the Cattle on Feed report to be released Friday. The placement number will keep traders cautious as it has been notoriously bearish.
2)	Feeder cattle continued to support the cattle complex as traders turned bullish on cattle supplies. Feedlots are active buyers in the country, finding continued tight supplies.	2)	Feeder cattle have had three strong days with liquidation generally running its course over that time. Futures could drift lower through the end of the week.
3)	Hog futures have corrected their overbought status and may find renewed buying interest if the funds want to defend their long positions.	3)	Hog futures have been in a downtrend and the lack of support from cash or cutouts may keep pressure on the market.
4)	The packers should be more aggressive Wednesday as they still need to purchase hogs to fulfill their slaughter needs.	4)	Fund traders hold record-long futures positions and further weakness could trigger increased liquidation.