GENERAL COMMENTS:
Traders entered the livestock complex Tuesday focused on taking additional actions following Monday's wide market swings. Although triple-digit gains developed in feeder cattle and lean hog futures, a portion of expected market activity shifted to the aggressive pressure in stock markets and several other commodities. This could keep livestock market participation sluggish over the next couple of days. Hog prices moved lower on the National Direct Afternoon Hog Report in moderate trade, falling $1.10 with a weighted average of $74.64 on 7,097 head. December corn is down 7 cents per bushel and December soybean meal is down $0.50 per ton. The Dow Jones Industrial Average is down 569 points and NASDAQ is down 423 points.
LIVE CATTLE:
Mixed trade in live cattle futures was seen at the closing bell, despite follow-through pressure in all contracts. Even though nearby live cattle futures traded lower, the lack of aggressive pressure seemed to create both a sense of longer-term uncertainty and short-term stability, at least in nearby futures trade. The most uncertainty in beef supply levels continues to be seen in spring and summer 2022 markets, impacting the February through June futures most. With October and December hovering near $122 and $127 per cwt respectively, traders appear to have hit price support levels following the nearly $10 per cwt market slide over the last couple of weeks. It is likely that even though additional bearish market news may develop, the potential to further damage price levels is starting to become very limited. This market stability at or near support levels typically precedes renewed noncommercial buyer interest, resulting in a strong positive price bounce. However, given the seasonal factors of the beef market, it is uncertain just how quickly such a price bounce may develop. October live cattle closed $0.40 lower at $122.00, December live cattle closed $0.30 lower at $127.50, and February live cattle closed $0.07 lower at $132.32. Cash cattle markets remain extremely quiet Tuesday afternoon with packer showing very little interest and only limited asking prices seen across cattle markets. Southern cattle have listed some cattle prices at $125 per cwt, which is similar to initial asking prices the last couple of weeks. Cattle are not priced on a dressed basis in the North, but both sides expect trade to develop Wednesday afternoon at the earliest and likely move into Thursday or Friday. With Friday starting a new month and quarter, there may be some incentive to hold out until then.
Tuesday's slaughter is estimated at 121,000 head, 1,000 less than a week ago and 3,000 more than year ago totals.
Boxed beef prices closed lower: choice down $1.14 ($301.56) and select down $0.03 ($274.35) with a movement of 155 loads (99.31 loads of choice, 21.20 loads of select, 26.19 loads of trim and 8.78 loads of ground beef).
WEDNESDAY'S CASH CATTLE CALL: Steady. Limited interest is still seen in the market late Tuesday and likely to keep both sides hesitant to step into the market early Wednesday morning. Packer interest may start to slowly develop as the day continues, but initial bids are likely to be softer than previously seen in the last couple weeks, but feeders seem to be reluctant to back away from asking prices at this point.
FEEDER CATTLE:
Firm buyer support actively moved back into feeder cattle trade as traders try to separate emotional market swings with true fundamental pressure seen in Monday's post-report price tumble. The fact that feeder cattle placements are higher than expected and likely to lead to additional gains in the next couple of months has helped to prepare traders for the reality that overall beef supplies through 2022 may not be as tight as earlier expected. However, this still doesn't totally offset the expectation that beef supplies will still tighten over the next year. Price premiums have also q been eroded in the upcoming months with a $1.80 per cwt trading range separating October through January futures contracts. With September futures nearing expiration, most trade has moved to October and November futures which gives a better indication of true market support in the coming days and weeks. September feeders closed $0.15 higher at $154.40, October feeders closed $1.35 higher at $156.12 and November feeders closed $1.47 higher at $157.05. The CME Feeder Cattle Index for Sept. 27: $154.81, down $0.06.
LEAN HOGS:
Strong additional gains developed in lean hog futures Tuesday, although expanded trade limits were not utilized. This will allow daily price limits to reset to $4.75 per cwt. December contracts led the complex higher with a $2.02 gain. This market shift higher represents a $11 per cwt market rally off the lows set two weeks ago. Even though hog supply levels are now seen as much tighter than before, the unchecked market support in late September is likely to be leaving the market vulnerable for a light to moderate correction in the near future. There remains uncertainty about continued support in cash and wholesale pork prices, given the volatility in these markets over the last couple of weeks. Until additional strong support can steadily develop into pork prices, it is likely that the upward market surges in lean hog prices could be limited. There remains increased volatility in the market, not only from industry production levels, but the recent wide swings in outside markets could add additional noncommercial trade interest to the entire lean hog complex in the coming days. October lean hogs closed $1.42 higher at $91.67, December lean hogs closed $2.02 higher at $83.57, and February lean hog futures closed $1.57 higher at $86.00. Pork prices tumbled aggressively lower once again Tuesday afternoon based on a $20 per cwt reduction in ham cuts. Other primal cuts have shown moderate price stability through the week. Pork cutouts totaled 351.84 loads with 308.49 loads of pork cutouts and 43.35 loads of trim. Pork cutout values: down $3.83, $108.12. Tuesday's slaughter is estimated at 476,000 head, 16,000 more than a week ago and down 14,000 from a year ago. The CME Lean Hog Index for Sept. 27: up $0.64, $92.15.
WEDNESDAY'S CASH HOG CALL: Steady. Even though strong support is seen in other areas of the hog market, it appears that cash markets may continue to lag futures trade support. Given consistent procurement goals, packers appear to be well covered for immediate needs, limiting aggressive bidding through the next couple of days.
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