GENERAL COMMENTS:
Livestock futures reversed moves seen last week with aggressive triple-digit rallies developing in both live cattle and feeder cattle trade, while significant price pressure flooded into lean hog trade. The significant market volatility seen over the last two weeks in all livestock markets has made a market correction inevitable, and traders seemingly took the opportunity of a new month and increased trade volume Monday to adjust these price levels. There will be a lot of attention paid to opening and early session price direction Tuesday morning, which in many ways, could help set the tone for market direction in the coming days. Hog prices moved lower on the National Direct Afternoon Hog Report in moderate trade, falling $0.91 with a weighted average of $72.01 on 6,383 head. December corn is down 3/4 cent per bushel, and December soybean meal is down $3.30 per ton. The Dow Jones Industrial Average is down 380 points, and the NASDAQ is down 350 points.
LIVE CATTLE:
Sharp gains quickly developed in nearby live cattle futures Monday as traders decisively broke away from the market slide seen last week. December contracts set the tone for the market with prices closing $2.85 per cwt higher while trading from $2 to $3 per cwt during most of the session. The hope is that this market move higher will not only spark additional active commercial and noncommercial trade interest to jump back into live cattle trade, but will clearly establish technical support levels at $125 per cwt. If traders can establish seasonal lows at $125 per cwt in December contracts, the potential for additional follow-through support in the coming days and weeks could spark additional much-needed momentum to futures and cash market prices through the fourth quarter of 2021. October live cattle closed $2.22 higher at $122.62, December live cattle closed $2.85 higher at $128.05, and February live cattle closed $2.37 at $132.52. Cash cattle activity remains at a standstill Monday afternoon. Although there is always a chance that activity will develop sooner than later, the expectation that bids and asking prices will not be developed until near midweek is more of the weekly reality seen by all participants. Showlists for the week appear to be mixed with lower cattle offered in Texas and Nebraska/Colorado, while higher offerings are reported in Kansas. It is likely that most trade volume will be seen Wednesday or later, but the previous trend of cattle trading Wednesday and following this market tone for the rest of the week cannot be ignored. Cash cattle last week were quoted mostly steady with the previous week as business was taking place, but weekly average prices posted a much less optimistic outlook on the market. The 5-area weekly average price Monday is listed at $122.56 per cwt. This is $1.08 per cwt lower than the previous week, and the lowest price since mid-August. The hope that renewed price support can quickly develop in early October is creating steady to higher cash cattle market expectations, but market firmness will need to hold in futures and beef values to change the recent market trend higher in the upcoming days.
Monday's slaughter is estimated at 120,000 head -- 1,000 more than a week ago and 4,000 more than year-ago totals.
Boxed beef prices closed mixed: choice down $3.18 ($289.18) and select up $0.32 ($265.16) with a movement of 103 loads (56.46 loads of choice, 17.58 loads of select, 14.69 loads of trim and 14.05 loads of ground beef).
TUESDAY'S CASH CATTLE CALL: Steady. Cash markets are expected to remain quiet until Wednesday or later. Both feeders and packers are closely monitoring futures trade direction and the activity level of wholesale beef markets. The hope to end the six-week price slide lower during the first week of October is on the minds of all cattle producers.
FEEDER CATTLE:
Strong triple-digit gains quickly flooded nearby feeder cattle contracts Monday, but the focus of cattle market trade was squarely planted on the direction and price activity in live cattle futures. Feeder cattle contracts simply followed along for the ride, creating some underlying concerns that if momentum does not hold in live cattle trade over the next couple of days, feeder cattle futures may quickly revert to the widespread market weakness seen during the last six weeks. Cattle placements in the month of September will be very closely monitored, but it will be another three weeks before the Cattle on Feed report delivers these totals. Until then, traders are expected to focus on the overall attitude of country buying as feeder cattle sales are expected to continue to increase over the next several weeks. From a technical standpoint, it appears that seasonal support may have been established last week. But with October through January futures eroding any seasonal premiums over the last several days, significant spot-month price gains may be more difficult to sustain given current cattle numbers. October feeders closed $2.25 higher at $155.00, November feeders closed $2.12 higher at $155.02 and January futures closed $1.70 higher at $155.55. The CME feeder cattle index 10/1/2021: $152.53, down $1.19.
LEAN HOGS:
The combination of bullish buyer support moving into cattle trade and last week's unchecked market rally surrounding reduced hog inventory numbers in the Sept. 1 Hogs and Pigs report led to moderate to strong corrective action being seen in all nearby lean hog trade. December lean hog futures led the complex lower, falling $2.07 per cwt, while all other nearby contracts posted losses of $1 to $1.77 per cwt. Given the optimism in the market at the end of September, these type of market shifts should not be surprising or even be viewed as a major market adjustment. Close attention will be given to where lean hog futures open and trade Tuesday morning. If active follow-through losses continue to develop, then traders may give some credit to the price reduction, but for now, traders are viewing Monday's moves as "normal market adjustments." The current "40-day moving average price for spot October lean hog futures is $85.62, still $5 per cwt under current price levels, indicating strong buyer support remains well entrenched through the entire complex. October lean hogs closed $1.50 lower at $90.80, December lean hogs closed $2.07 lower at $83.10, and February lean hog futures closed $1.77 lower at $85.50. Pork prices shifted slightly lower following mixed price moves in individual primal cuts. Pork cutouts totaled 292.27 loads with 256.71 loads of pork cutouts and 35.55 loads of trim. Pork cutout values: down $0.99, $112.40. Monday's slaughter is estimated at 481,000 head -- 3,000 more than a week ago and down 3,000 from a year ago. The CME lean hog index 10/1/2021: up $0.66, $94.05.
TUESDAY'S CASH HOG CALL: Steady. Underlying cash market support remains slow to develop despite the aggressive price gyrations in wholesale pork cuts and recent market surge in futures trade. Packers remain conservative when bidding hogs given the variability seen in processing levels over the last couple of weeks and desire to keep supplies closely tied with short-term pork demand.
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