GENERAL COMMENTS:
Active gains moved into cattle futures Friday
afternoon. The continued active commercial interest, combined with
technical buying signals developing through the end of the week, sparked
widespread market interest. Hog futures eroded in late-week trade as
traders focused on the afternoon USDA Hogs and Pigs report. Increased
hog inventory is expected to add further weakness to the lean hog
complex next week. From Friday to Friday, livestock futures scored the
following changes: Oct live cattle, up $5.68; Dec live cattle, up $5.43;
Oct feeder cattle, up $4; Nov feeder cattle, up $5.95; Oct lean hogs,
up $4.93; and Dec lean hogs, up $3.60. Corn futures slipped slightly in
limited late-week trade with December closing down 1 cent. Stock markets
tumbled Friday on impeachment talks, with the Dow down 128 points and
the NASDAQ down 121 points.
CASH MARKETS
Cash cattle trade developed over the last two
days with prices $2 to $5 per cwt higher than last week. Light to
moderate trade in the North Thursday started the ball rolling with
dressed trade at $165 per cwt. This is generally $3 per cwt higher than
last week and signaled underlying support in all areas. Trade continued
to filter into the market during the day Friday with most trade in the
South seen at $103 per cwt, a $2-per-cwt gain from last week. Live trade
in the North was the last to join the party, pushing prices to $106 to
$107 per cwt, a $4- to $5-per-cwt rally. The increased cash market
momentum seen through the day was stimulated by aggressive futures
market trade, which helped to focus on potential market growth over the
coming weeks. The National Daily Direct afternoon hog report was $0.60
lower ($43-$50.50, weighted average $48.39) with total volume reported
at 6,635 head.
LIVE CATTLE
Futures closed $0.10 lower to $2.07 higher. The
combination of increased cash cattle prices developing Friday and
technical market shifts sparked triple-digit gains in all nearby live
cattle trade. This pushed prices to their highest levels since early
August and is narrowing the gap with August highs. The firm momentum is
expected to be the focus early Monday as traders try to defend current
gains and expand markets further through the end of the month. As prices
continue to distance themselves from summer lows set in August, sights
are being set on additional strong fall support. Traders are looking for
supplies of market-ready cattle to ease over the coming weeks, giving
credibility to both short- and long-term bullish market support
possible. Beef cutouts: lower, down $0.53 (select, $189.86) and down
$0.93 (choice, $212.58) with moderate demand and offerings, 102 loads
(54 loads of choice cuts, 21 loads of select cuts, 8 loads of trimmings,
19 loads of coarse grinds).
MONDAY'S CASH CATTLE CALL
Futures closed $2 lower to $1.52 higher.
Triple-digit gains developed in all but the lightly traded September
2020 contract. The strong support sweeping through live cattle futures
has spilled over to the rest of the cattle trade. Friday's move pushed
spot-month October above July highs, sparking increased technical
support and breaking the feeder cattle complex out of its two-month-long
sideways trend. CME cash feeder index for 9/24 is $140.03, up $0.23.
FEEDER CATTLE
Futures closed off $0.07 to up $0.65. The feeder
cattle market has been the steady token this week, and with a bump in
dressed cattle prices, it wouldn't be unlikely to see feeder cattle end
the week stronger -- not to mention last week's Cattle on Feed report
clearly indicated (with fewer placements moved last month) that there
are plenty of cattle feeders to be dispersed this time around. The CME
feeder cattle index for 9/25/19 stands at $141.13.
LEAN HOGS
Futures closed $1.10 lower to $1.05 higher. Firm
pressure developed Friday in all but the spot-month October contract.
The firm support in the lightly traded October contract continues to
hold, while all other futures contracts were under strong pressure on
the lack of new developments with China trade talks and concern that
softness early next week will further pull prices away from the recent
bounce seen during the week. The quarterly USDA Hogs and Pigs report
showed a 3% increase in total inventory to 77.7 million hogs as of Sept.
1. This is also a 3% increase from June inventory. The current
inventory is the highest for Sept. 1 since current records started in
1998. The increase will likely have a bearish impact on trade early next
week. Although farrowing intentions from December through May are
expected to remain stable, the current supply will likely keep prices
under pressure over the near future. Pork cutouts posted strong gains
Friday. Pork cutout values added $1.25 per cwt, moving to $73.26 per cwt
on 229 loads. CME cash lean index for 9/25 is $54.72, up $0.05. DTN
Projected lean index for 9/26 is $55.34, up $0.62.
MONDAY'S CASH HOG CALL
Steady to $1 higher. Despite the late-week
pressure, cash markets are expected to remain steady to higher with
packers still taking advantage of strong margins and the expectation
that available supplies will continue over the near future. Monday
slaughter numbers are expected at 483,000 head.
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