General Comments:
Cash cattle continues to dribble into the market through the week with prices steady to lower than early-week activity. This still is posting significant price losses from last week's average, but the tone of the market may continue to weaken through the end of the week. It is uncertain if packers will be able to purchase all weekly needs before the Friday afternoon Cattle on Feed report, but it is typical to see trade reach into late Friday afternoon on a report day. Live trade has developed Wednesday at $103 to $106.50 live, mostly $106 per cwt. This is generally $2 per cwt lower than last week. Dressed business has been reported from $162 to $166, although most trade is hovering around $164 per cwt. This is $3 per cwt below last week's average and could continue to spark renewed pressure over the next two days. Futures trade is expected to continue to hold a defensive tone, although mixed trade is likely during the Thursday session, similar to the back and forth price swings the last few days. Traders have four beef and cattle reports to focus on over the next two days, most of which typically don't aggressively shift market direction. But given the volatility and uncertainty in the market, it doesn't take much to quickly change the tone of the market. First up is the weekly Export Sales report, followed by Cold Storage and Livestock Slaughter reports Thursday afternoon. Friday afternoon is the Oct. 1 Cattle on Feed report, which will be the major focus over the next couple of days.
Lean hog futures markets are struggling to get additional buyers excited about the market given the underlying supply of hogs still in route to processing plants over the next few months and uncertainty about further demand growth over the near future. The surge in prices over the last three weeks is still leaving the market in a strong short-term position compared to market moves since the pandemic started. But the inability to actively break above $70 per cwt in spot month December contracts is becoming a much harder barrier to break through than previously though. With prices able to break above this level Monday, the ability to hold above these levels has become the issue as limited buyer support is seen at these price thresholds. Nearby prices are not expected to show significant near-term losses, creating the potential to establish a sideways market trend between $65 and $70 per cwt. Traders will closely follow the activity levels in the weekly Export Sales report and primarily the new sales to China. This could bring about increased support at the end of the week. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to firm. Slaughter Thursday is expected at 489,000 head. Saturday runs are expected at 252,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Renewed buyer support is stepping back into deferred feeder cattle futures midweek, creating the potential for renewed buyer interest to develop in what is expected to remain an oversold market through late October. | 1) | Live cattle futures continue to remain defensive given the underlying pressure in the complex. The focus on increased expected cattle placements during September is likely to add price pressure over the coming days. |
| 2) | Open interest continues to improve in feeder cattle trade, sparking further indications that a market bottom has either been established, or is near. This may continue to spark follow-through buyer interest in both live cattle and feeder cattle futures in the near future. | 2) | Traders are looking for larger cattle on feeder numbers and increased placement levels in Friday's Cattle on Feed report. This could continue to weigh on overall market support across the entire complex. |
| 3) | Firm gains have redeveloped midweek in cash hog and pork cutout values with triple-digit gains on Wednesday in each of these markets. The focus on still-firm fundamental support is likely to spill over into lean hog futures through the end of the week. | 3) | Lack of buyer support midweek in lean hog futures at closing bell continues to limit market optimism despite firmness in cash values. The pressure in futures trade indicates traders' concerns surrounding follow-through price support over the near future. |
| 4) | Lean hog futures continue to trade near the top end of the trading range, with the ability to break through short and intermediate resistance levels possible each and every day. This will continue to keep buyers active and watchful as any small shift in market factors could quickly spark sharp gains in December lean hog futures. | 4) | A dismal Export Sales report Thursday morning could quickly create further price pressure in the complex. This may add increased weakness, sparking uncertainty and price volatility in most lean hog futures during late week trade. |
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