GENERAL COMMENTS:
Following wide, triple-digit, market moves over the past two trading sessions, traders seem to have a much calmer attitude Wednesday morning. Light to moderate losses are seen in most livestock futures during the first few hours of trade. The lack of follow-through support Wednesday is no indication of a change in market direction, but more confirmation that traders are willing to take a much-needed breath at current price levels, before stepping back into the complex. With end of month and quarter quickly approaching, it is expected some moderate position adjustments will develop in all markets. This could add to short-term market variability over the next couple of days. December corn is up 4 1/2 cents per bushel and December soybean meal is up $0.80 per ton. The Dow Jones Industrial Average is up 189 points with Nasdaq up 54 points.
LIVE CATTLE:
Follow-through weakness trickled back into live cattle trade with futures holding 30- to 50-cent losses most of Wednesday morning. Limited sell orders have slowly exhausted the downward market moves at midday, with price mixed in a very narrow trading range. The potential to keep prices stable at midweek is likely helping rekindle light but noticeable buyer support across nearby and deferred contracts. December futures remain near $127.30 per cwt, just above intermediate support levels of $127 per cwt set earlier this month. The concern that additional light but noticeable softness will continue to be seen in wholesale beef values, and lack of upward moves in cash trade, could keep traders out of the market for the near future. Cash cattle trade has started to slowly be reported Wednesday morning with light trade in the South reported at $124 per cwt. This is mostly steady with last week's weighted average price in the area. Packer interest is expected to improve through the rest of the day in all areas with more Southern trade likely to develop over the next couple of days. Bids are seen at $122 live and $196 dressed in the North, but as of yet feeders have not been willing to lower asking prices to these levels. Asking prices are around $125 in the South and not fully established in the North. It is likely asking prices will develop around $200 per cwt dressed in the North, which would mean a moderate gap remains between initial offers and bids. It is still too early to tell if the early Southern trade in Kansas and Texas will be enough to set the tone of the market through the rest of the week, or if price levels will continue to adjust in the next couple of days. The Fed Cattle Exchange Auction on Wednesday listed a total of 3,350 head; 611 actually sold; 1,459 were scratched from the auction; and 1,281 head were listed as unsold, as they did not meet the reserve prices, that ranged from $122 to $124. Opening prices ranged from $121 to $123, high bids ranged from $121 to $124. The state-by-state breakdown looks like this: Texas 961 total head, with 494 head sold at $124, 467 head went unsold, none were scratched from the auction; Nebraska 1,190 total head, none of which sold during the auction, 182 head went unsold and 1,009 were scratched from the auction as they were sold just before the auction started at $125; Oklahoma 694 total head, none of which sold during the auction, 244 head went unsold and 450 were scratched from the auction as they were sold just before the auction started at $123 to $124; Kansas 505 total head, with 117 head sold at $122.25, 388 head went unsold, and none were scratched from the auction.
Wednesday morning's boxed beef prices are mixed in moderate trade, with choice cuts $2.54 lower at $299.02 and selects up $0.06 at $274.41 on a total count of 84 loads. Dow Jones estimated Wednesday's cattle slaughter at 121,000, 1,000 more than a week ago, and steady with year ago levels.
FEEDER CATTLE:
Light to moderate losses have developed in feeder cattle futures as traders seem to be slowly backing away from the wide price swings seen over the last two trading sessions. Nearby futures are holding consistent losses of 30- to 40-cents per cwt, although very limited trade volume is seen Wednesday morning. Renewed firmness in corn and grain prices is also adding to the fundamental softness in feeder cattle trade as buyers are focusing on the higher cost of production through the end of the year. It is likely most futures trade has fully worked through the inventory level adjustments from last week's reports, which could help traders to build on current price levels in the coming days and weeks. With increased cash feeder cattle sales over the coming weeks, and more cattle moving from pasture to feedlots, the potential for seasonal market pressure remains. But this will not overshadow the expectation that long-term supply tightness is still expected in both feeder cattle and live cattle numbers as the beef herd continues to contract. The CME Feeder Index was priced at $154.81 for Sept. 27.
LEAN HOGS:
The aggressive buyer support seen the last two trading sessions has cooled for the moment with light to moderate losses across the complex. Following a $5 to $7 rally over the last couple of trading sessions, traders are now focusing on where the longer-term price direction may lead. Most contracts are holding 50- to 70-cent losses during morning trade, as traders are slowly adjusting positions and taking profits. This could allow for additional follow-through buyer support in all nearby and deferred lean hog trade in the next couple of weeks, but further gains are expected to be much more defined and focused on fundamental market direction. The lack of stability in both wholesale pork prices and cash hog values over the last couple of weeks is adding to concerns that more volatility will remain in the hog complex well into the fourth quarter. There will also be increased attention on Thursday's export sales report, helping to get a better indication of China's activity in the pork market through the end of September. Sharp adjustments were made to pork cutout values following a $35 per cwt rally in ham prices. Daily price variability in ham prices has continued to create wide market swings in the entire wholesale pork cutout market. Cutouts are up $9.02 at $117.14 Wednesday morning on 190.98 loads. Negotiated hog prices are $1.19 lower at $73.95 per cwt on 3,443 head. The swine/pork market formula price is listed at $92.39 per cwt. Dow Jones estimated Wednesday's hog slaughter at 476,000 -- 1,000 less than a week ago and 10,000 less than year ago levels. The CME Lean Hog Index is estimated at $92.92 for Sept. 28.
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