Thursday Morning Livestock Market Summary - Buyer Momentum Continues

GENERAL COMMENTS:

The surge in futures prices and beef values sparked limited midweek cash trade at $111 to $112 through the South with most trades at $112 per cwt. This is $2 per cwt higher than last week. The ability to continue the upward march in cash prices continues to spark some additional underlying buyer interest, as asking prices remain firm at $115 live in the South and $182 in the North. There seems to be little indication that feeders are willing to back away from the elevated prices put on cattle at this point, given the increased packer margin that continues to be built into the complex over the last couple of weeks as beef values have continued to surge higher during October. One of the biggest unknowns is if packers will try to get cash trade done yet Thursday before moving into the month of November, or will they do the bulk of buying on Friday, putting it on November's books? Futures buying is expected to be renewed following strong support in live cattle and feeder cattle futures Wednesday. Even though nearby contracts have posted new short-term highs for this rally with December closing at $118.30 per cwt Wednesday, the ability for feeder cattle to break out of the previous market range with November futures moving above $147 per cwt is sparking increased underlying support through the entire complex. This technical breakthrough in nearby feeder cattle futures is expected to stimulate additional underlying support through the end of the week. Thursday slaughter runs are expected at 117,000 head.

Strong moves late Wednesday helped push nearby lean hog futures away from short-term lows, although the underlying tone of the market still remains generally weak. Spillover support from the aggressive moves in cattle trade at midweek is expected to spark some additional underlying strength as traders focus less on what could happen in trade talks with China and more on underlying short-term demand that continues to remain generally good. This is not expected to spark aggressive long-term gains until more clear direction is seen regarding export trade with China, but the focus on holding prices above technical support is building through the end of the month. It appears hog trade is finally getting tired of the "on again, off again" tone in recent news stories about the development and potential signing of a partial trade agreement next month. But the point is that the direction of short-term lean hog prices is contingent on gaining increased access to China's pork demand following the continued supply issues due to African swine fever. Cash hog values are expected to be steady to $1 per cwt lower, with most bids expected $1 lower. Expected slaughter Thursday is at 490,000 head. Saturday runs are expected at 235,000 head.

	BULL SIDE		BEAR SIDE
1)	Strong cash cattle support has developed in parts of Southern cattle country at midweek, sparking increased expectations of additional gains through the end of the week. This continued support follows strong upward moves in futures and wholesale beef values.	1)	Despite technical support in cattle futures, the air is getting thin at these price levels and the market could quickly change course, creating the potential for a moderate and swift correction in the near future.
2)	Select boxed beef values surged $3.10 per cwt higher Wednesday, narrowing the choice to select price spread by over $3.50 per cwt in one day. The underlying support in wholesale beef values through late October is sparking increased support as traders expect tighter supplies in the months to come.	2)	With October contracts expiring, a wide gap is left between October and December futures. Can cash prices adjust higher to December contract levels or will the underlying futures trade revert back to cash price levels over the next couple of weeks? As December takes over as official front-month contract we may see increased softness through the entire complex.
3)	Lean hog futures trade broke away from the compelling weakness still developing in cash and wholesale pork markets. This move higher is helping spark additional end-of-month buying as cattle market momentum spilled over in hog trade. This may help rekindle additional late-week buying Thursday morning.	3)	Continued cash market pressure is slowly but steadily developing through the entire complex. This is limiting fundamental support through the entire market despite midweek gains in futures trade.
4)	Traders are eagerly looking toward the morning release of weekly export sales reports. The hope and expectation of increased China purchase at the end of last week is creating some momentum in nearby trade.	4)	With meetings in Chile canceled due to violence in the country, questions remain as to when and where China and the U.S. presidents will meet concerning the partial trade deal that was expected to be signed during November.

#completeherdhealth

Wednesday Closing Livestock Market Summary - All Three Livestock Markets Close Over $1 Higher

GENERAL COMMENTS:

John Wayne may have whispered from above to the livestock market, "Ya know, we're burin' daylight," and from that spur of inspiration, Wednesday's market got to work. December live cattle closed $1.47 higher, November feeder cattle closed $2.40 higher and December lean hogs closed $1.45 higher. Hog prices are lower on the National Direct Afternoon Hog Report, down $1.48 with a weighted average of $49.60. December corn was up 4 1/2 cents per bushel, and December soybean meal was down $0.80. The Dow Jones Industrial Average was up 115.27 points and the NASDAQ was up 27.13 points.

LIVE CATTLE:

Live cattle futures had a strong day, with the December contract closing $1.47 higher at $118.30. Live cattle prices haven't been that high in nearly six months. Nearby and deferred contracts alike all closed significantly higher with the only contract not closing with gains of more than $1.00 was the April 2020 board, which was up $0.97. Wednesday's market closed with enough polish that bulls want to throw their hats and sip on nice, smooth whiskey and say, "Told ya so!" But the real telling won't be until more time passes. Wednesday's rally won't equate to much if Thursday throws it all away and it's merely forgotten about by Friday. There are still plenty of bears who think the market is due for a correction.

Nevertheless, the vigor and speed mustered up on the futures board trickled into parts of the cash market. Some trade took place in the South, up $2.00 from last week's weighted average, at $112.00. Many feeders denied early bids and are holding out for higher prices yet. Wednesday's slaughter is estimated at 117,000 head -- down 1,000 head from a week ago and 4,000 head from a year ago.

Closing boxed beef prices are mixed: choice down $0.50 ($230.05) and select up healthily, up $3.10 ($206.67), Wednesday's boxed beef movement totaled 113 loads (49.15 loads of choice, 28.28 loads of select, 4.60 loads of trim and 30.77 loads of ground beef).

THURSDAY'S CASH CATTLE CALL: $2.00 to $3.00 higher. It's not completely out of reach to think that prices could jump $2.00 to $3.00 this week with packers in need of cattle and plenty anxious to get cattle sooner rather than later to keep up with robust boxed beef prices while they last.

FEEDER CATTLE:

The feeder cattle market closed Wednesday with more spark and excitement than did the live cattle market. November feeder cattle were up $2.40, January and March feeders were up $3.20 and April feeders up $2.85. Across the board, futures rallied and closed the day significantly higher. On an estimated run of 5,294 head (down 4,336 head from the previous week) OKC West in El Reno, Oklahoma, sold feeder steers mostly steady to $3.00 lower, with the biggest decline on heavy six weights. Feeder heifers were steady. It was noted that cold and wet conditions, coupled with winter weather advisories over the last few days, hindered the sales total volume of calves. The CME feeder cattle index 10/29/19: up $0.25 at $145.08.

LEAN HOGS:

Despite the cash market barking lower, the lean hog futures complex latched onto the energy and momentum built in the cattle complex and closed higher. December lean hogs closed with the highest gains, up $1.45 at $65.77. February lean hogs are up $0.65 at $73.27, and the April board is up $0.42 at $79.57. Pork cutouts totaled 305.34 loads with 251.96 loads of pork cuts and 53.38 loads of trim. Pork cutout values: down $1.28 at $75.44. The CME lean hog index 10/28/19: down $0.61 at $63.51.

THURSDAY'S CASH HOG CALL: Steady to $1.00 lower. Despite what the futures market does, packers don't have to work hard at getting hogs bought right now, and the market needs an outlet.

#completeherdhealth

Wednesday Midday Livestock Market Summary - Livestock Contracts Shaking the Tuesday Blues

General Comments

"Upward & Onward," the board shouts as live cattle, feeder cattle and lean hog markets capture gains at the noon hour. December corn is up 3 1/2 cents per bushel and December soybean meal is down $0.10. The Dow Jones Industrial Average is up 6.96 points and NASDAQ is down 11.40 points.

LIVE CATTLE

The December live cattle market nears the $118.00 threshold with a $1.12 rally Wednesday morning. The entire complex has taken the day with storm and is rallying in both nearby and deferred contracts alike. Interest is buying mainly in the December and February contracts as Thursday (tomorrow) the October board expires. It doesn't take much of an expert to realize that this year is not a typical year with surprises and unusual behavior popping up left and right. To add to that list, fat cattle traded early again this week in parts of the South for $112, $2.00 higher than last week's weighted average. Asking prices are mostly at $115 in the South and $180 to $182 in the North. If Wednesday can close on a positive note and not give all ground it gained away on Thursday, you may see feeders doing their happy dance as they could have the potential to sell fats for higher money again this week. A lot will depend on the board's ability to keep its gains and how the next couple of days treat the boxed beef market.

Fed Cattle Exchange listed a total of 433 head of heifers with three lots in Kansas and one lot in Texas. Two lots sold in Kansas at $112, with the third lot bid up to $112.75, but the offer was passed. The lot in Texas was bid up to $112.25, but that offer was passed as well.

Midday boxed beef cutouts are mixed: choice down $0.47 ($230.08) and select up $3.40 ($206.97) with a boxed beef movement of 70 loads (30.50 loads of choice cuts, 15.62 loads of select cuts, 0 loads of trim and 24.01 loads of ground beef).

FEEDER CATTLE

The feeder cattle market moves higher Wednesday and etches toward the resistance plane of $147.00 established in early May. If feeders can negotiate the fat cattle trade strategically this week and claim prices $1.00 to $2.00 higher, the feeder cattle market should be able to rally off of some of the fat cattle market's energy. November feeder cattle are up $0.57 at $146.05, January feeder cattle are up $0.60 at $142.22 with nearby and deferred contracts all rallying at the same progressive pace.

LEAN HOGS

Lean hog contracts weren't getting left in the dust this Wednesday. December lean hogs are up $1.40 at $65.72, February lean hogs are $0.67 at $73.27 as the entire complex rallies with support except for the February 2021 contract. Nearby contracts are gaining more and more support in cumulative volume, but the May 2020 contract can hardly pay anyone enough money to give it some interest.

The projected lean hog index for 10/29/19 is down $0.38 at $63.13, and the actual lean hog index for 10/28/19 is down $0.61 at $63.51. Prices are higher on the National Direct Morning Hog Report, up $0.40 with a weighted average of $51.28, ranging from $47.00 to $52.49 on 5,850 head sold and a five-day rolling average of $52.17. Pork cutouts totaled 186.72 loads with 155.94 loads of pork cuts and 30.78 loads of trim. Pork cutout values are down $0.01 at $76.71.

#completeherdhealth

Wednesday Morning Livestock Market Summary - Continued Strength Expected in Cattle Futures

GENERAL COMMENTS:

Activity is yet to develop in cash cattle trade, but firm support in futures and wholesale beef values help solidify expectations of higher cash prices. Although asking prices are starting to pop up, feedlot managers remain hesitant to price cattle too early in the week in the event continued underlying support in the complex leaves revenue on the table once the dust clears. Additional bids and asking prices should develop through the morning Wednesday, although active trade may not be seen until sometime Thursday or Friday. Given the fact that cash cattle prices have steadily moved higher each of the last six weeks, a continuation of that trend higher is expected, especially with the help of active boxed beef gains through the last several days. Futures trade is expected mixed to generally higher with the generally bullish tone through the live cattle complex helping to spark additional underlying support. Even though prices were not able to secure active gains Tuesday, the continued steady support developing in the complex adds to the "slow but steady" shift higher seen over the last several weeks. October futures are nearing expiration, which could spark some additional front-month volatility, but traders continue to focus on December contracts reaching for the $117 per cwt levels through the end of the month. Wednesday slaughter runs are expected at 118,000 head.

Underlying pressure in lean hog futures is expected to continue through the rest of October and likely taint early November trade as continued questions of whether a partial trade deal will be signed in November when the presidents of China and the U.S. will be on hand at the G-20 summit. Although the pork industry continues to watch for a partial trade deal, uncertainty grows. China's pork production remains devastated by African swine fever, and our pork industry's assumption is China will supplement its need for pork by aggressively importing U.S. pork. But if that is not their plan, it could minimize the overall impact on the hog and pork industry of any partial trade deal with China. It is good to remember that China has been dedicated over the last decade to becoming self-sufficient in pork production. Even with the devastation of African swine fever, this still seems to be their goal. So any additional pork exports to China that do develop are expected to be a short-term plan on their part until they can rebuild hog production supplies domestically. That does not change the fact that pork prices continue to soar in China and at some point they should buy additional pork from us in order to limit consumer price levels for the sake of their economic health. Cash hog values are expected to be steady to $1 per cwt lower, with most bids $1 lower. Expected slaughter Wednesday is 490,000 head. Saturday runs are expected at 235,000 head.

	BULL SIDE		BEAR SIDE
1)	Nearby live cattle futures continue to churn higher as steady to firm buying steadily moves into the complex. This has moved prices to six-month highs with traders looking for additional long-term support based on tighter beef cattle supplies during early 2020.	1)	Feeder cattle futures continue to have a hard time sparking underlying support despite the continued gains in live cattle trade. The seasonal increase in spring calves moving to market, has dampened market expectations with November contracts still unable to breach resistance levels of $146.07 per cwt established in mid-October.
2)	The firmness in futures trade and continued aggressive moves higher in boxed beef values are creating expectations of firm to higher cash cattle trade by the end of the week.	2)	Questions of "how much longer can the rally continue" keep coming to mind as live cattle futures have been on this steady price incline since early September. This could bring about a moderate to firm correction with limited long-term concern, but quickly disrupt the momentum being built in the complex.
3)	Continued talk that a partial trade deal with China may be ready for signatures at the G-20 summit in November remains the dangling carrot that still is giving a sense of hope that active buyer support will develop before the end of the year.	3)	Nearby lean hog futures continue to struggle to maintain recent buyer support. December futures are currently within striking distance of breaking through initial support levels of $64.25 per cwt set in mid-September. A move below these levels would put the next target near $60 per cwt once again.
4)	Pork cutout values sparked renewed support Tuesday, indicating additional buyer strength is moving into the complex. This support is based on continued strong domestic demand that cannot be understated given the aggressive supply glut the entire pork complex remains entrenched in.	4)	Growing uncertainty of China's intent to buy U.S. pork ahead of any partial trade agreement or after puts additional tension on the entire complex. None-the-less, traders continue to focus on the upcoming export sales report Thursday with hopes that active China sales will appear.

#completeherdhealth