The painful week of losses in both cattle and hog prices finally came to a close Friday, capped by a bearish Cattle on Feed report that showed inventory at 11.7 million head, up 4% year-over-year. Hog prices closed lower on the National Direct Afternoon Hog Report, down $1.27 with a weighted average of $59.55 on 5,161 head. December corn closed up 3 cents per bushel and December soybean meal closed up $4 per ton. The Dow Jones Industrial Average is down 28 points and NASDAQ is up 29 points.
For the week: December corn closed up 17 1/4 cents; December soybean meal closed up $18.90; December live cattle lost $5.05; November feeder cattle lost $5.375; December lean hogs lost $2.775.
LIVE CATTLE:
Friday's Cattle on Feed report indeed delivered news of record-high October inventory: 11.7 million head, up 4% year-over-year and slightly above the average pre-report estimates. Although the calves are coming into the lots relatively light this year after dealing with exceptional drought across much of the western United States, the raw numbers of placements (and disappointing disappearance through September) will likely be interpreted by futures traders as bearish confirmation of this week's drop in prices. At the close of the Friday session, the December live cattle contract was up $0.10 at $103.575, the February contract was down $0.15 at $106.625, and the April contract was down $0.60 at $109.275. Friday's cattle slaughter was seen at 103,000, coming to 583,000 week-to-date.
MONDAY'S CASH CATTLE CALL: Steady. Although Monday's own activity is likely to be limited to the collection of showlists, after this week's aggressive drop in prices, a pause would be warranted.
FEEDER CATTLE:
Through the next several days of wintry weather across the Plains, the logistics of moving feeder cattle from one location to another are likely to be challenging, and, therefore, the feedlots' appetite for new numbers may temporarily stall. Even before the weather set in, and even before nearby corn futures hit $4.20 for the first time this year, calf buyers were already demonstrating that they wanted to fill lots, but only at a certain price. Wednesday's big sale in El Reno, Oklahoma, for instance, pushed through over 1,100 calves at no better than $126.58 for 700-lb steers. In this environment, futures prices fell for the sixth straight trading session, with the October contract closing down $0.30 at $133.525 and the November contract down $0.775 at $129.65. The CME Feeder Cattle Index from Oct. 21 was down $2.83 at 135.53.
LEAN HOGS:
Lean hog futures turned around toward the end of the Friday session, but one day of mild gains wasn't enough to counteract the overall bearish tone through a week when the December contract, for instance, has dropped 4%. That nearby contract closed Friday up $0.825 at $67.025, the February 2021 contract closed up $0.075 at $66.925, and the April contract closed up $0.025 at $69.725. Thursday's Cold Storage report may have been a bit of a boost to some of the cutout values, showing pork belly supplies down 39% relative to last year's September measurement, but the rest of the hog market structure remains unsurprising to traders: heavy slaughter numbers (seen at 486,000 Friday) offset by strong exports but disappointing domestic restaurant recovery. Week-to-date hog slaughter is 2,435,000 and Saturday's slaughter is pegged at 244,000.
Pork cutouts total 345.34 loads with 307.08 loads of pork cuts and 38.25 loads of trim. Pork cutout values: down $5.59 at 93.25, with hams (down $12.71) and bellies (down $17.02) driving that volatility. The CME lean hog index for October 21 was down $0.09 at $78.60, followed by another loss of $0.06 for the DTN projected lean hog index for Oct. 22: $78.54.
MONDAY'S CASH HOG CALL: Lower. If the leading cuts can't maintain their strength in the export market, packers will likely put continued pressure on the market.
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