GENERAL COMMENTS:
Strong pressure redeveloped in lean hog futures trade Friday afternoon following a report that a Chinese delegation had canceled planned farm visits and shortened their trip in the U.S. The positive vibes seen last week surrounding trade talks between the U.S. and China have started to fade, leaving traders concerned that hog markets will be unable to hold recent gains. Most cattle futures contracts eroded Friday. The Sept. 1 Cattle on Feed report released Friday afternoon is viewed as generally bullish with the biggest surprise lower-than-expected placement numbers. From Friday to Friday, livestock futures scored the following changes: Oct live cattle, up $1.28; Dec live cattle, up $0.78; Sep feeder cattle, up $3.83; Oct feeder cattle, up $4.63; Oct lean hogs, off $6.12; and Dec lean hogs, off $2.45. Cash cattle saw light-to-moderate trade in the North Friday afternoon with live sales developing at $103 per cwt. This is generally $3 per cwt higher than last week. Additional trade is expected to develop in the North before both sides call it a day, although both sides are locked in a stand-off. Bids of $162 dressed and $103 live in the North and $101 in the South are being passed up as asking prices remain at $104 and higher in the South and $164 and higher in the North. The inability to demand higher prices at the end of the week following a favorable Cattle on Feed report will significantly diminish feedlot managers' marketing power over the near future. The National Daily Direct afternoon hog report was $0.22 lower ($39-$45, weighted average $44.14) on 12,412 head. Corn prices shifted lower Friday with December closing down 2 cents. Stock markets were lower in light trade with the Dow down 160 points and the NASDAQ down 65 points.
LIVE CATTLE
Futures closed $0.27 to $0.67 lower. Pressure held in live cattle trade through most of Friday's session with traders adjusting ahead of the afternoon Cattle on Feed report. Traders were also concerned that, following a two-week rally in the complex, a limited-to-moderate correction could be seen on seasonal beef movement over the next few weeks. The October futures contract is still holding under $100 per cwt, although it is showing limited activity. The inability to hold prices above this level Friday is causing some concerns about continued support next week. Cattle on feed numbers on Sept. 1 fell below 11 million head for the first time in 2019, 1% lower than a year ago. This is viewed as generally favorable given the alignment with report expectations and evaporating cattle numbers in feed yards. Beef cutouts: lower, down $0.44 (select, $191.72) and down $1.20 (choice, $216.97) with light demand and heavy offerings, 121 loads (43 loads of choice cuts, 25 loads of select cuts, 18 loads of trimmings, 35 loads of coarse grinds).
MONDAY'S CASH CATTLE CALL
Steady. Early week cash cattle market direction is expected to remain quiet with both sides assessing long- and short-range inventory needs and showlist distribution. Given the firmness of cash trade through the end of the week, asking prices are expected to be elevated in order to establish market momentum.
FEEDER CATTLE
Futures closed 0.27 higher to $0.57 lower. Feeder cattle placements in August led the positive news of Friday's Cattle on Feed report with total placement during August at 91% of year-ago levels. This deviated from pre-report estimates the most of any factor in the report, and is 3.5% lower than estimated. The wide range of estimates also indicated that this was the number that traders were least confident about going into the report. Although cattle placements are 9% below August 2018 levels, the total placement of 1.88 million head is the largest placement since May. Futures trade followed the general market weakness seen in live cattle futures with deferred contract losses offsetting limited late-week gains in September and October contract months. CME cash feeder index for 9/19 is $135.53, down $1.76.
LEAN HOGS
Futures closed $0.15 higher to $1.70 lower. Moderate-to-strong losses developed late Friday as reports that a Chinese trade delegation visiting Montana focusing on the wheat trade canceled farm visits. A comment by President Donald Trump that he "doesn't need a trade deal" before the 2020 election also created concerns that any hope of a quick resolution to the trade talks with China is cooling again. The erratic roller coaster moves surrounding trade continue, making it appear that the ride is far from over. Traders will try to assess additional information over the weekend, but the fact that lean hog futures did not remain at session lows may indicate that the full impact of these comments may have been seen. Pork cutouts inched higher as strong belly gains offset pressure in rib cuts. Pork cutout values added $0.13 per cwt, moving to $69.15 per cwt on 266 loads. CME cash lean index for 9/18 is $56.32, down $0.44. DTN Projected lean index for 9/19 is $55.80, down $0.52.
MONDAY'S CASH HOG CALL
Steady to $1 lower. Limited direction change is expected early next week or through the rest of the month. Continued strong packer margins will help to keep plants running at or near capacity, which should limit overall cash pressure early in the week. Monday slaughter numbers are expected at 485,000 head.
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