GENERAL COMMENTS:
Selling interest in nearby lean hog futures encountered pockets of low liquidity Thursday morning, triggering sudden losses that have extended through the middle of the session. This bearishness has spilled over into live cattle and feeder cattle futures, which are all lower across the board. December corn is down 2 1/2 cents per bushel and December soybean meal is down $1.60 per ton. The Dow Jones Industrial Average is down 145.32 points and NASDAQ is up 26.14 points.
LIVE CATTLE:
Despite some early cash business this week that was fully steady with last week's strong prices (mostly $172 dressed in the North and mostly $110 live in South), that strength wasn't certain enough Thursday morning to influence futures traders, who instead took direction from the collapse in lean hog prices. The nearby December live cattle futures contract eventually slid under last week's low of $109.35, triggering additional sales, although overall futures trading volume has been quite thin so far during this session. The February contact is down $2.85 at $110.30 and the April contract is down $2.725 at $113.90. Export sales of 46,400 metric tons (mt), mostly to South Korea (17,300 mt), Mexico (10,600 mt), and Japan (7,000 mt), may provide a bullish boost to the beef export outlook. Actual export shipment pace, at 22,300 mt, was a marketing-year high and the sales numbers were a notable improvement compared to recent weeks.
Boxed beef prices are higher: choice up $1.94 ($237.78) and select up $0.27 ($213.89) with a movement of 66 loads (32.43 loads of choice, 13.86 loads of select, 5.97 loads of trim and 13.55 loads of ground beef).
FEEDER CATTLE:
Losses are relatively light in the feeder cattle futures contracts Thursday morning -- the November contract is down only $0.125 at $136.90, the January contract is down $1.875 at $135.425, and the March contract is down $2.00 at $134.90. But trading volume is light, too, leaving the market vulnerable to pockets of choppy price movement as the session wears on. Strong demand from order buyers across the country this week, particularly in anticipation of next week's holiday, may help keep a floor under the temporary bearishness in futures.
LEAN HOGS:
The December lean hog futures contract is down $2.10 at $63.70, the February contract is down $3.00 at $62.90, and the April contract is down $2.475 at $66.30. There have been some patches of fast trade through the session, although this may be only algorithmic trading activity triggered by a series of fresh 3-month lows while the charts churn lower. The February chart, for instance, hadn't dipped below $63.70 since early September, and the next chart support may not be found until $58.25 from early August. Some of the initial direction Thursday morning may have been influenced by the U.S. Dollar Index, which is suddenly higher Thursday, as well as a disappointing export sales report. Pork export sales at 28,900 mt were down 32% from last week and down 18% from the prior 4-week average. Actual shipment progress to China totaled 13,100 mt, but new sales to China were only 2,100 mt once decreases of 1,400 mt were included. The projected lean hog index for 11/18/2020 is down $0.55 at $68.77, and the actual index for 11/17/2020 was down $0.41 at $69.32. Pork cutouts Thursday morning total 204.79 loads with 164.79 loads of pork cuts and 40 loads of trim. Pork cutout values: up $1.14, $78.82.
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