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DTN Midday Livestock Comments          10/21 12:03

   Active Losses Develop Thursday 

   Sharp, triple-digit losses in lean hog futures have continued to weaken the 
overall hog complex Thursday morning. Cattle futures remain mostly lower with 
nearby live cattle falling nearly $1 per cwt as traders are once again 
concerned about beef demand.

By Rick Kment, Contributing Analyst


   Active losses in lean hog futures have taken center stage once again 
Thursday morning. After breaking through initial support levels at midweek, 
nearby contracts have posted sharp losses from $2 to $2.50 per cwt as traders 
try to uncover renewed support. Cattle trade is much less volatile, but live 
cattle prices have dipped below early week lows and are also trying to find a 
sense of technical support before the end of the week. December corn is down 7 
cents per bushel and December soybean meal is down $5.20 per ton. The Dow Jones 
Industrial Average is down 126 points with Nasdaq up 49 points.


   Live cattle futures have posted moderate to active losses Thursday morning 
with nearby contracts .85 to .97 per cwt lower in light to moderate trade. The 
lack of higher cash cattle trade during the week and beef values that have been 
steady at best are weighing on futures, which had focused on a potential market 
turnaround over the last week. Given that prices are still in the top 25% of 
recent trading ranges, technical support levels are going to be less of an 
issue, with more focus moving on fundamental support for live cattle and beef 
cattle markets. Cash cattle activity remains at a standstill following light to 
moderate developing in most areas. Trade this week has been steady with last 
week's market averages at $124 live and $196 per cwt dressed. It is very likely 
that additional cattle will be sold before the end of the week, but unless 
major shifts are seen in either futures trade or Friday's Cattle on Feed 
report, overall price ranges may be little moved. Asking prices on cattle still 
on showlists are at $126 and higher live basis and $198 and higher dressed. 
With cattle still left for sale, feeders seem confident they will get higher 
prices or they appear willing to hold them into next week. The Special Fed 
Cattle Exchange Auction held today listed a total of 2,430 head (Texas 1,284 
head; Kansas 756 head; Nebraska 138 head; South Dakota 252 head), of which none 
actually sold. Reserve prices ranged from $121 to $126. Opening prices ranged 
from $119 to $122, high bids ranged from $121 to $124.25. Thursday morning's 
boxed beef prices are higher in moderate trade, with choice cuts $0.44 higher 
at $280.47 and selects up $1.01 at $263.81 on a total count of 71 loads. Dow 
Jones estimated Thursday's cattle slaughter at 120,000 -- steady with a week 
ago and 2,000 more than year ago levels.


   Feeder cattle trade continues to hold its own Thursday morning, despite 
pressure in other livestock markets. Limited gains are seen in spot October 
contracts, moving prices back above the $156 per cwt price level. Although this 
level has very little technical market relevance, the ability to break away 
from the rest of the complex is helping add a sense of stability in feeder 
cattle that seems to be quickly evaporating in live cattle trade. Deferred 
futures are showing the most pressure, as continued concerns surrounding 
production costs and future demand. But given price level and recent market 
swings, feeder cattle markets may continue to hold within the currently wide 
trading range. Analyst expectations for Friday's cattle placements are at 
101.4% year ago levels with a range of 98.8 to 103.3%. The ability for report 
totals to remain close to expectations may help to bring more stability to the 
entire complex. The CME Feeder Index was priced at $154.03 for Oct. 19.


   Lean hog futures have seen aggressive selling Thursday morning. Following 
the inability to hold initial support levels at $77 per cwt over the past 
couple of days, significant liquidation started. The lack of China's 
involvement in pork purchases in the latest export sales report added to the 
weaker trend, allowing nearby contracts to trade $2 to $2.50 per cwt lower 
through most of the morning. Next support levels for spot December lean hog 
futures remain near $72 per cwt, less than $2 per cwt below current price 
levels. A move below these levels would essentially wipe out the aggressive 
market shifts seen over the last month, causing traders to once again search 
for any sign of long-term support. The lower supply data seen in September has 
little long-term impact if pork demand cannot be maintained. Weekly export 
sales for pork are listed at 20,900 metric tons (mt). This is viewed as 
generally bearish for the overall pork industry. Although total sales are not 
totally out of line with previous weeks, the continued lack of buyer support 
from China quickly gained traders attention. China weekly purchases were just 
200 mt, although 4,100 mt of previously purchased pork was shipped last week. 
This is once again creating significant concern that overall pork demand may 
continue to struggle well into 2022. Wholesale pork prices surged higher 
following an aggressive gain in belly cuts of $47.17 per cwt. Cutouts are up 
$7.95 at $104.82 Thursday morning on 150.24 loads. Negotiated hog prices are 
$1.02 lower at $65.19 on 5,325 head on the morning report. Dow Jones estimated 
Thursday's hog slaughter at 478,000 -- 1,000 more than a week ago and 9,000 
less than year-ago levels. The CME Lean Hog Index is listed at $85.89 per cwt 
for Oct. 20.

   Rick Kment can be reached

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