GENERAL COMMENTS:
Lean hog futures saw early gains Thursday morning on news that trade talks are planned for October between the U.S. and China. Market optimism faded through the day, but prices remained mostly higher. Sharp losses quickly developed in live cattle and feeder cattle futures as nearby live cattle futures broke through support levels, sparking technical pressure. Cash cattle trade started to develop in the South on Thursday with limited activity seen at $100 per cwt in Kansas and Texas. This is $2 to $3 per cwt lower than last week. No additional trade is reported in the North following lower trade at $165 to $167 Wednesday, which was generally $4 per cwt lower than last week. With this amount of cattle sold, it is likely that the tone of the market is already set, but additional trade is still possible before the end of the week. Bids are seen in the North at $103 live and $163 dressed. The National Daily Direct afternoon hog report was $1.28 lower ($49-$57.50 per cwt, weighted average $53.42). Corn prices bounced higher, but lost most of the early momentum at closing bell. December corn futures closed 1/4 cent higher. Stock markets were higher in moderate trade with the Dow up 403 points and the NASDAQ up 142 points.
LIVE CATTLE: Futures closed $0.05 higher to $1.35 lower. Sharp losses flooded nearby live cattle futures late Thursday with October and December contracts quickly breaking through short-term support. This sparked additional technical pressure with nearby contracts setting new contract lows. The expectation is that additional technical weakness may continue to develop through the already weak live cattle complex. Unlike market pressure that developed in August, these losses are based not on production concerns, but on technical weakness in the complex and uncertainty that current or short-term demand may struggle due to higher wholesale beef values and growing market ready cattle supplies already in the pipeline. Beef cut-outs: lower, down $4.48 (select, $204.47) to down $1.23 (choice, $229.42) with light demand and light-to-moderate offerings, 150 loads (81 loads of choice cuts, 50 loads of select cuts, 9 loads of trimmings, 10 loads of coarse grinds).
FRIDAY'S CASH CATTLE CALL: $2 to $4 lower from last week. Following trade across the South at $100 per cwt Thursday, the tone of the market appears to be set. There may be additional trade seen Friday, but price levels are unlikely to change much before the end of the week.
FEEDER CATTLE: Futures settled $0.25 to $1.15 lower. Strong pressure quickly moved into feeder cattle futures with triple-digit losses seen in September and October contracts. Early support in corn prices quickly cooled earlier buyer support as traders once again focused on the potential for increased feed and production costs. Traders also were already looking for an opportunity to cover positions earlier in the week given the lack of support seen in live cattle futures. This allowed traders to square positions at the end of the week without breaking out of the recent upward market trend. CME cash feeder index for 9/4 is unavailable at this time.
LEAN HOGS: Futures closed $0.82 lower to $1.10 higher. Buyer support flooded the market early Thursday morning following news that trade talks between the U.S. and China are planned for October. There is increased hope that this may be the round of talks that will be able to spark momentum and position both sides to get a deal done. The front-month October contract quickly looked past this positivity, as any trade talks in October will have little to no impact on short-term demand. Traders are also looking for any signs of trade with China in Friday's export sales report. The weekly export sales report was delayed due to Monday's holiday. Pork values continue to adjust lower following widespread primal weakness. Pork cutout values fell $0.90 per cwt, moving to $71.96 per cwt on 339 loads. CME cash lean index for 9/3 is $66.57, up $1.45. DTN Projected lean index for 9/4 is $65.25, down $1.32.
FRIDAY'S CASH HOG CALL: Steady to $1.50 lower. Continued pressure is expected through the end of the week on lighter end-of-the-week buying as packers focus on weather conditions limiting processing capacity. Friday slaughter numbers are expected at 432,000 head. Saturday runs are estimated at 353,000 head.
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