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DTN Midday Livestock Comments          10/20 11:56

   Hog Futures Continue Lower 

   Moderate pressure in lean hog trade has eroded last week's gains. This broke 
through immediate support levels and is creating additional longer-term concern 
for the complex. Cattle prices are mixed with traders trying to establish more 
defined market ranges.

By Rick Kment, Contributing Analyst


   Light trade is seen in all livestock futures Wednesday morning. The 
development of cash cattle trade in Texas at steady money is creating hopes 
that prices may continue to strengthen as the week continues. Cattle futures 
are mostly higher, offsetting early week softness, while follow-through 
pressure in hog markets has now moved through initial support levels. This 
could leave hog markets vulnerable to additional liquidation in the next couple 
of days. December corn is up 5 1/4 cents per bushel and December soybean meal 
is up $4.50 per ton. The Dow Jones Industrial Average is up 280 points with 
Nasdaq up 11 points.


   Trade is mixed in live cattle futures Wednesday morning. Traders are 
focusing on limited market movement at midweek. Nearby contracts are slightly 
above last week's lows, which may indicate traders trying to establish a more 
stable range. Analyst expectations for Friday's Cattle on Feed report are a 
0.7% drop in overall on-feed numbers compared to a year ago. Marketings are 
expected to see the most significant drop, with 97.2% of last year's level 
reported in September. Traders are starting to adjust positions to these 
levels, but these shifts could be seen until closing bell Friday. Cash cattle 
interest is developing Wednesday morning. Bids are available in all areas with 
packers offering $124 live basis in the South and $125 live basis and $196 
dressed basis in Nebraska. Light trade has developed in Texas at $124 per cwt, 
but it appears most feeders are holding out for higher money. The $124 per cwt 
trade is fully steady with last week's average. If the opportunity to move 
prices higher is there, now appears to be the time to make it happen. The Fed 
Cattle Exchange Auction on Wednesday listed a total of 2,757 head, of which 
none actually sold, 362 were scratched from the auction and 2,395 head were 
listed as unsold, as they did not meet the reserve prices, which ranged from 
$121 to $126. Opening prices ranged from $120 to $122, high bids ranged from 
$123 to $124. The state-by-state breakdown looks like this: Texas 1,137 total 
head, all of which went unsold; Kansas 1,299 total head, with none sold, 937 
head went unsold and 362 were scratched from the auction; South Dakota 252 
total head, all of which went unsold; Nebraska 69 total head, all of which went 
unsold. Wednesday morning's boxed beef prices are mixed in moderate trade, with 
choice cuts $0.37 lower at $280.51 and selects up $1.47 at $263.00 on a total 
count of 77 loads. Dow Jones estimated Wednesday's cattle slaughter at 121,000 
-- 1,000 more than a week ago and 2,000 more than year ago levels.


   Traders in the feeder cattle complex are trying their best to regain market 
composure following early week losses. Most contracts are higher at midday, 
with the most active support seen in January and March. The focus on limited 
movement in live cattle trade, combined with uncertainty as to how the upcoming 
Cattle on Feed report will impact trade has helped draw buyers back into the 
market. But it is going to be a difficult task to push prices significantly 
higher over the next couple of days with markets likely to wander within a 
moderate trading range. Cash feeder cattle auctions continue to see increased 
volume, although price levels are unevenly mixed. Last week's national feeder 
cattle summary posted prices generally $2 lower to $3 per cwt higher with 
overall demand described as moderate to good. Variability of cattle being sold 
continues to be the biggest focus on price levels at this point. The CME Feeder 
Index was priced at $154.10 for Oct. 18.


   Moderate pressure is seen early Wednesday morning. This selling has left 
additional softness through the entire complex. Although losses for the day 
have been kept in check, the most recent shift lower has moved through support 
levels. December contracts have broken below $77 per cwt, while February 
contracts are at $80 per cwt. A close at these levels will offset recent market 
support and could open the door for additional underlying pressure over the 
next two weeks. Although limited stability is starting to emerge in cash and 
pork values, the lack of buyer support in the futures market may test further 
market lows over the upcoming days. Cutouts are up $1.74 at $101.01 Wednesday 
morning on 167.30 loads. Negotiated hog prices are $0.35 lower at $66.21 on 
6,159 head on the morning report. Dow Jones estimated Wednesday's hog slaughter 
at 478,000 -- 1,000 more than a week ago and 12,000 less than year ago levels. 
The CME Lean Hog Index is listed at $85.89 per cwt for Oct. 18.

   Rick Kment can be reached

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