GENERAL COMMENTS:
Monday morning news of a fire in JBS' Grand Island, Nebraska, plant created uncertainty through much of the morning. With reports that the fire did not affect processing and fabrication parts of the plant, and later, confirmation that JBS plans on running slaughter schedules starting Tuesday, the focus moved away from processing issues and back to the technical market freefall that has overwhelmed the market over the last week. Sharp triple-digit losses developed in cattle and hog futures with feeder cattle and lean hog futures leading the market lower Monday. Hog prices moved lower on the National Direct Afternoon Hog Report in light trade, falling $1.38 with a weighted average of $84.48 on 5,304 head. December corn is down 4 1/4 cents per bushel and December soybean meal is up $2.70 per ton. The Dow Jones Industrial Average is up 261 points and NASDAQ is down 9 points.
LIVE CATTLE:
The good news in the live cattle market Monday is that JBS has announced that they plan on running the Grand Island plant Tuesday. The fire that started Sunday night is reported to have not affected procurement or fabrication facilities, and will allow the plant to return to production after one day of remaining dark. It is still uncertain if the plant will return to full capacity or 6,000-head per day over the next couple of days, but the fact that the plant will be operating in any capacity is encouraging. Beyond plant and cattle procurement issues, the live cattle market has more significant issues, which is not likely to recover as quickly as the Grand Island beef plant. There is a potential that light to moderate buying could step back into the live cattle market Tuesday, but the sharp downward spiral in cattle prices still carries significant and longer-term bearishness, which could add further liquidation during the next couple of weeks. Triple-digit losses held in October through April futures, and given the even more aggressive pressure in feeder cattle and lean hog trade Monday, October contracts may still test support of $120 to $121 per cwt in the next couple of days. Combined with eroding beef values, technical pressure may continue to mount Tuesday morning. As prices continue to work lower, the amount of traders willing to liquidate will start to dwindle, making a potential market turnaround (when it does develop) very quick and aggressive, even though lightly traded counter to fundamental factors. October live cattle closed $1.15 lower at $122.27, December live cattle closed $1.07 lower at $127.15, and February live cattle closed $1.60 lower at $130.42. Cash cattle trade remains quiet Monday afternoon and is not expected to see much interest until Wednesday or Thursday this week. The five-state weighted average price last week is listed at $124.79 per cwt, which is a $0.82 discount from the week previous. This is the first time in four weeks that the weighted average price has fallen below $125 per cwt, indicating further pressure possible in the upcoming weeks. Continued widespread pressure in beef cuts and futures trade is adding even more concern that post-Labor Day activity will continue to carry a bearish tone in all sectors of the market.
Monday's slaughter is estimated at 114,000 head, 111,000 more than holiday runs a week ago and 4,000 less than a year ago.
Boxed beef prices closed lower: choice down $1.29 ($325.93) and select down $1.21 ($292.16) with a movement of 125 loads (69.45 loads of choice, 26.49 loads of select, 12.40 loads of trim and 16.52 loads of ground beef).
TUESDAY'S CASH CATTLE CALL: Steady to lower. Packer and feeder interest is expected to remain generally quiet Tuesday morning. There is potential for market stability as JBS' Grand Island plant plans on coming back online Tuesday, but the weakness in the cattle complex is much more involved than processing plant issues.
FEEDER CATTLE:
Even though the news cycle focused more on fat cattle procurement levels surrounding JBS' fire at the Grand Island plant, feeder cattle futures took the brunt of the early week selling pressure. This pressure is based more on continued bearish market concerns about long-term supply and demand issues in the market than short-term beef availability and plant processing levels. September and October feeder cattle trade posted losses of $2 per cwt or greater with spot contracts falling to $152.20 per cwt. Feeder cattle futures have tumbled over $15 per cwt since hitting contract highs on Aug. 20. The inability to even stabilize the market for a single trading session is creating increased panic through the entire complex as traders liquidate positions as the price freefall continues to develop. Technical pressure has become the driver of this market shift, and until markets become so oversold that the majority of buyers flood back into the market, further losses are likely. The best hope at this point is that June lows of $150 per cwt will be able to hold and spark renewed interest in the next few days. If prices fall below the $150 per cwt level, the next firm support level is set at $145 per cwt. Given the current structure of the market, prices quickly shifting in $5 increments over a few days is not out line. September feeders closed $2.05 lower at $152.20, October feeders closed $2.27 lower at $155.45 and November feeders closed $1.97 lower at $157.15. The CME Feeder Cattle Index for Sept. 10: $155.09, up $0.09.
LEAN HOGS:
Lean hog futures moved to six-month lows Monday as aggressive liquidation swept through the complex once again. Over the last three trading sessions, nearby lean hog futures have fallen over $6 per cwt in December contracts. October through February contracts have not been able to close higher since the Labor Day weekend, as aggressive technical and fundamental pressure has swept through the complex. The combination of erosion in cash and pork cutout values is also focusing on the fact that growing production levels through the upcoming months could put further pressure in all hog markets well into 2022. The fact that December through June contacts posted relatively uniform losses Monday (all falling more than $2 per cwt) continues to point to more available pork supplies over an extended period of time. Although domestic demand is expected to continue to remain strong, growing production in China will continue to add uncertainty about moving excess pork to Asia over the upcoming months and years. This will continue to be a long-term weight on the hog market, which has become accustomed to helping supply China's tight pork supplies following African swine fever in their country over the last couple of years. October lean hogs closed $1.67 lower at $80.77, December lean hogs closed $2.72 lower at $73.37, and February lean hog futures closed $2.50 lower at $76.75. Pork prices continue to tumble lower with moderate to strong pressure seen in all primal cuts late Monday. Pork cutouts totaled 338.32 loads with 308.51 loads of pork cutouts and 29.80 loads of trim. Pork cutout values: down $4.53, $100.57. Monday's slaughter is estimated at 471,000 head, 465,000 more than week ago holiday activity and down 16,000 from a year ago. The CME Lean Hog Index for Sept. 10: down $0.33, $97.40.
TUESDAY'S CASH HOG CALL: Steady to $1 lower. Continued widespread market weakness Monday is expected to put cash hog prices on the defensive through much of the week. Futures and cash traders are looking for much needed supportive market shifts, with no indication that a market bottom has yet been seen.
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