DTN Midday Livestock Comments 10/18 11:53
Cattle Trade Softens in Early Week Activity
Follow-through pressure in feeder cattle trade posted triple-digit losses in
nearby feeder cattle futures Monday morning. Cattle markets are showing signs
of a developing market correction following last week's support. Hog futures on
the other hand have continued to build on previous buyer interest, although
trade volume remains light.
By Rick Kment, Contributing Analyst
Limited trade activity is seen in livestock futures Monday morning with firm
pressure developing in live cattle and feeder cattle futures, while
follow-through buyer support is seen in lean hog trade. There was very little
news over the weekend that would spark widespread market direction in either
cattle or hog trade, but traders continue to focus on overall economic market
shifts and the global market positions, which have and will continue to impact
meat exports. Trade is expected to remain mixed through most of the session
Monday with traders starting to consider the end of week release of cattle on
feed reports, while also focusing on daily shifts in beef and pork values
heading into the last half of October. December corn is up 2 cents per bushel
and December soybean meal is down $0.40 per ton. The Dow Jones Industrial
Average is up 8 points with Nasdaq up 68 points.
Live cattle futures have struggled to maintain buyer interest early Monday
morning as prices have given back Friday's gains. This has pulled price levels
away from six-week highs as traders continue to focus on pressure in feeder
cattle trade and an early pullback in financial and stock markets. Although
firm cash market support is developing, the lack of active fundamental support
over the past couple of weeks is starting to create some underlying concerns by
commercial traders that upward market potential could be limited through the
rest of the year. These ideas are not fully founded at this point, but it does
create some uncertainty about longer-term market direction. Cash cattle
interest Monday morning remains typically quiet with both sides unwilling to
step into the market at this point. Asking prices and bids are likely not to be
fully developed until sometime Tuesday or Wednesday with trade likely to be
pushed off until midweek or later. The recent trend of moderate Wednesday trade
setting the tone for weekly prices seems to be the prevalent thought, but
feeders are likely to become more focused on higher prices through the last
half of October, which could allow many to hold out until later in the week.
With the monthly cattle on feed report released this next Friday, it is
possible that some trades will try to hold out cash business until after the
report. The 5-area weekly average price last week increased $0.88 per cwt to
$123.84. This is likely to help support additional support through the end of
the week. Monday morning's boxed beef prices are mixed in light trade, with
choice cuts $0.29 lower at $279.95 and selects up $0.83 at $261.45 on a total
count of 47 loads. Dow Jones estimated Monday's cattle slaughter at 120,000,
1,000 less than a week ago and 1,000 more than year ago levels.
The combination of higher corn prices and follow-through pressure in live
cattle trade has soured buyer support in all feeder cattle trade Monday
morning. Although at this point, the downward market shifts are not indicating
significant technical or fundamental changes in the overall cattle or feeder
cattle market, morning losses have pulled buyers out of the equation. Nearby
contracts are holding triple-digit losses, with October contracts leading the
market lower with a $1.42 per cwt loss. The combined price pullback between
Friday and Monday has pushed nearby contracts $2 per cwt lower, causing some to
rethink just how much additional short-term support may develop in the complex.
Although the cattle on feed report will not be seen until Friday, questions of
overall placement levels are still in the back of traders' minds as many
traders are still trying to sort out market gyrations which developed after
last month's cattle on feed report. The CME Feeder Cattle Index was priced at
$153.35 for Oct. 15.
Limited follow-through buyer support has trickled back into the lean hog
futures complex Monday morning Nearby contracts are holding 10 to 30 cent
gains, as traders continue to push prices slowly but steadily away from recent
lows last week. The ability to bring additional buyer interest to the market
not only indicates that traders may have established firm support levels, but
trade may become more focused on narrow to moderate price shifts, breaking away
from the reactionary type of moves seen over the last month. Chinese customs
data released Monday pegged September 2021 Pork imports at 210,000 mt, down 44%
from the year earlier month. Year to date pork imports in September totaled
3.14 million mt, down 4.3% from the year earlier period. This reduction of pork
movement to China is confirmation of the lower export activity that has caused
active pressure in most lean hog trade through early October. Cutouts are up
$5.84 at $107.16 Monday morning on 156.30 loads. Negotiated hog prices are
$0.96 lower at $67.33 per cwt on 6,171 head. The swine/pork market formula
price is listed at $85.80 per cwt. Dow Jones estimated Monday's hog slaughter
at 475,000, 3,000 less than a week ago, while 2,000 less than year ago levels.
The CME Lean Hog Index is listed at $87.59 per cwt for Oct. 14.
Rick Kment can be reached firstname.lastname@example.org
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