GENERAL COMMENTS:
Post-report fireworks in livestock trade did not disappoint Monday with lean hog futures hitting limit gains in two nearby contracts, while triple-digit losses flooded through most feeder cattle trade. Not only were traders trying to adjust for inventory changes in the industry, but production costs significantly changed given double-digit gains in corn prices Monday. Live cattle markets posted limited losses, but it is likely that more volatility will move through the livestock market and the live cattle complex, specifically, in the coming days. This could keep most traders on edge and price levels volatile during the week. Hog prices moved lower on the National Direct Afternoon Hog Report in light trade, falling $1.19 with a weighted average of $75.74 on 5,865 head. December corn is up 12 3/4 cents per bushel and December soybean meal is up $1.00 per ton. The Dow Jones Industrial Average is up 71 points and NASDAQ is down 77 points.
LIVE CATTLE:
Live cattle futures seemed to be the calmest of all livestock trade Monday. Even though cattle on feed numbers in Friday's report still left traders surprised, the focus in the market Monday continued to be primarily in the feeder cattle and lean hog complex. Although most of the price moves and market activity were outside the live cattle complex Monday, this doesn't mean that the live cattle contracts are totally off the hook in the coming days. There is a strong possibility that once market activity slows in both the feeder cattle and lean hog trade over the next couple of days, traders may take a much more intense look at live cattle contracts. This is likely to show up most in spring and summer 2022 contracts, which also took the brunt of any downward pressure Monday. Traders are also closely focusing on beef demand expectations in the coming weeks, as wholesale and retail beef values remain rather volatile heading into the fall demand season. October live cattle closed $0.52 lower at $122.40, December live cattle closed $0.35 lower at $127.80, and February live cattle closed $0.22 lower at $132.40. Cash cattle markets are extremely quiet, which is expected for a Monday. The underlying softness in futures trade is likely to keep both sides cautious on the sidelines until midweek or later. Showlists for the week appear to be mixed with gains in Texas, while Kansas, Nebraska and Colorado all are showing lower offered cattle on lists. The five-area weekly average price last week is $123.64 per cwt. This is $0.24 per cwt lower than the previous week and is the fourth consecutive weekly loss. Traditionally, cash cattle prices bottom out the week following Labor Day and steadily move higher through early October. The hope it that without this early fall market bounce, prices will not see the normal late October/November price pressure.
Monday's slaughter is estimated at 119,000 head, steady with a week ago and 3,000 more than year ago totals.
Boxed beef prices closed lower: choice down $0.62 ($302.70) and select down $0.15 ($274.38) with a movement of 109 loads (64.49 loads of choice, 22.58 loads of select, 10.21 loads of trim and 12.02 loads of ground beef).
TUESDAY'S CASH CATTLE CALL: Steady. Limited activity is likely early Tuesday with packers expected to be slow to develop bids through the week. Stability in boxed beef values and nearby futures prices will go a long way in helping to instill cash market confidence.
FEEDER CATTLE:
Triple-digit pressure developed in most feeder cattle contracts as traders tried to adjust positions and price levels following Friday's cattle on feed report. Given the fact that feeder cattle placements in August increased 2% above last year's levels and well above most analysts' expectations, traders are trying to adjust to the larger-than-expected supply levels that will likely hit the fat cattle market in the second and third quarter of 2022. October through January contracts posted the most aggressive losses of $2.50 to $3 per cwt as traders expect even more cattle to move through show rings in the next couple of months as seasonal feeder cattle sales will hit their stride. It is still expected that when the dust clears and all cattle are sold, overall cattle numbers will be lighter than in years past, but this is little consolation to the short-term market, which is facing the largest August placement on record. September feeders closed $0.37 lower at $154.25, October feeders closed $2.57 lower at $154.77 and November feeders closed $3.00 lower at $155.57. The CME Feeder Cattle Index for Sept. 24: $154.87, up $0.89.
LEAN HOGS:
Lean hog futures responded to the news of tighter-than-expected hog inventory levels in Friday's hogs and pigs report. Given that the report posted such a significant difference than market estimates, traders tried to readjust positions Monday. Typically, the hogs and pigs report is a "non-event," as production and intention data seems to be very well indicated by the industry before the report. With the integrated level of the industry, it is still a little confusing as to how so many analysts could be so far off on not only current inventory levels, but farrowing intentions for the upcoming year. This moved futures trade to an aggressive daily trade limit of $4.75 per cwt, allowing for expanded trade limits of $7 per cwt to be available Tuesday. Just because trade limits are expanded doesn't mean prices will move this far, but the risk is that any contract month has the potential to move $7 per cwt in either direction. Just the wider limits alone adds a sense of volatility not usually seen in the lean hog market. October lean hogs closed $2.97 higher at $90.25, December lean hogs closed $4.75 higher at $81.55, and February lean hog futures closed $4.75 higher at $84.42. Pork prices shifted moderately higher Monday as primal cuts firmed in most markets. It appears that prices are slightly more stable than recent wild price swings. Pork cutouts totaled 301.09 loads with 266.82 loads of pork cutouts and 34.27 loads of trim. Pork cutout values: up $1.18, $111.95. Monday's slaughter is estimated at 478,000 head, 15,000 more than a week ago and down 12,000 from a year ago. The CME Lean Hog Index for Sept. 24: up $0.04, $91.51.
TUESDAY'S CASH HOG CALL: Steady. Strong underlying support in futures trade and the expectation that hog inventory levels will continue to tighten should help to solidify cash hog values in the next several weeks. Although given packer concerns of keeping procurement levels active, short-term cash price moves may be more limited than many would like.
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