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DTN Midday Livestock Comments          11/30 11:29

   Lean Hog Futures React to Loosened Chinese COVID-19 Restrictions

   A surge of speculative buying activity has driven up the prices of lean hog 
futures Wednesday, and also live cattle and feeder cattle as well. 

Elaine Kub
Contributing Analyst


   A surge of speculative buying activity has driven up the prices of lean hog 
futures Wednesday, and also live cattle and feeder cattle as well. The three 
nearby lean hog contracts have been up by triple digits through most of 
Wednesday morning, and the more illiquid feeder cattle futures markets have 
also displayed some streaky gains. COVID-19 lockdowns have eased in some 
Chinese provinces in response to citizen protests, and the broader commodity 
markets -- notably including crude oil -- seem to interpret this as a sign that 
Chinese imports of certain products may not suffer as much as feared earlier 
this week. December corn is down 4 cents per bushel and December soybean meal 
is up $9.30 per ton. The Dow Jones Industrial Average is down 177.25 points.


   Live cattle futures are following along with the livestock sector's 
generally bullish mood, with a relatively active volume of futures trade for a 
Wednesday morning. December live cattle are up $0.475 at $153.15, February live 
cattle are up $0.925 at $155.725 and April live cattle are up $0.80 at 
$159.375. These gains are still only a small gesture to counteract the slide of 
the past few trading sessions, and the December contract, for instance, remains 
more than $1 below the contract high from a week ago. The market is still 
waiting for cash cattle trade to develop this week, but so far, early asking 
prices have been noted in the South at $156 to $157. The Fed Cattle Exchange 
Auction held today reported 07 lots (all in TX), totaling 1,506 head of cattle, 
none of which sold. Opening prices were at $153, high bids had a range of $155 
to $155.25, but none of these bids met reserve prices of $155.50 to $156. 
Wednesday's slaughter is estimated at 128,000 head, which is 4,000 more than a 
week ago and 4,000 more than a year ago.  

   Boxed beef prices are lower Wednesday morning: choice down $2.51 ($252.23) 
and select down $0.43 ($225.39) with a movement of 84 loads (59.95 loads of 
choice, 9.77 loads of select, 0 loads of trim and 13.78 loads of ground beef).


   Feeder cattle are posting impressive gains so far Wednesday, but these may 
merely be a feature of spotty trading volume and lots of room on the chart for 
contracts to move back higher without encountering sell orders. January feeders 
are up $1.70 at $179.70, March feeders are up $1.675 at $182.85 and April 
feeders are up $1.55 at $186.40. The March contract, for instance, would have 
to churn another $2.50 higher to retake its high from last week. However, 
there's no arguing that the market has recognized the looming shortage of beef 
animals in this drought-plagued country, particularly in the longer-term 
horizon. The October 2023 contract has traded above $200 per cwt throughout 
this whole month, and opportunities exist for cow-calf operators confident of 
supply to lock in 2023 hedges or insurance policies at prices that are likely 
to support profits.


   Lean hog futures are leading the livestock sector higher Wednesday, with a 
bullish narrative from outside markets as China eases some COVID-19 
restrictions, promising improved consumer demand for things like pork, and 
crude oil regains $80 per barrel. December lean hogs are up $1.55 at $82.625, 
February lean hogs are up $1.425 at $85.575 and April lean hogs are up $1.375 
at $91.125. The concentration of buying activity in the front-month December 
futures contract is a sign that short-term speculators are the ones driving 
Wednesday's price action. While the day-to-day sentiment of lean hog futures 
traders remains in thrall to the story of China and its consumer demand, there 
is going to be continued risk of volatile up-or-down days, because the 
effectiveness of citizen protests or government reactions will evolve over 
time. Here in the U.S., Wednesday's slaughter is seen at 492,000 head, which is 
4,000 more than a week ago and 13,000 more than a year ago at this time.

   The projected CME Lean Hog Index for Nov. 28 is down $0.43 at $84.21, and 
the actual index for Nov. 25 was down $0.93 at $84.63. Hog prices were higher 
in Wednesday's Daily Direct Morning Hog Report, with the weighted average price 
$86.20 up $4.16 on 23,226 head. Base prices ranged from $77.50 to $88, bringing 
the five-day rolling average to $84.73. Pork cutouts total 180.81 loads with 
153.49 loads of pork cuts and 27.49 loads of trim. Pork cutout values: up 
$2.52, $88.20.


   Cattlemen are eager for supply and demand mechanics to swing their way, but 
the market isn't completely free of hurdles as bearish concerns about the U.S. 
and global economies loom. Hear DTN Livestock Analyst ShayLe Stewart's thoughts 
on the 2023 cattle market at the all-virtual DTN Ag Summit on Dec. 12-13. Full 
details available at

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