GENERAL COMMENTS:
Active gains developed in all cattle trade with triple-digit price surges following lower-than-expected cattle numbers and placement levels on Friday's cattle on feed report. Even though most nearby contracts sustained triple-digit surges, contracts closed well below session highs, as buyer interest clearly eroded as the session continued. This is slightly concerning as it could open up further market shifts later in the week in both live cattle and feeder cattle futures. Hog futures remain generally weak, but limited nearby gains developed, giving hope that additional buyer activity will develop Tuesday morning. Hog prices moved lower on the National Direct Afternoon Hog Report in light trade, falling $1.97 with a weighted average of $63.66 on 5,731 head. December corn is unchanged and December soybean meal is down $0.20 per ton. The Dow Jones Industrial Average is up 74 points and NASDAQ is up 148 points.
LIVE CATTLE:
Triple-digit gains developed in live cattle trade Monday as traders backed away from the bearish expectations seen last week before the cattle on feed report. Gains on Monday essentially offset Friday's losses in most nearby contracts, leaving traders a little more confident that firm buyer support may continue to slowly develop through the rest of October. Traders are also looking for support from both cash cattle trade this week and boxed beef prices, which have had trouble stabilizing through the month of October. Even though pressure last week has put live cattle markets under pressure, it is important to keep in mind that nearby contracts are still within $1 to $2 per cwt of six-week highs. Short-term caution and uneasiness by noncommercial buyers to actively return to the market may continue to limit sustained upward market moves through late October and early November. October live cattle closed $0.92 higher at $125.02, December live cattle closed $1.20 higher at $129.52 and February live cattle up $1.25 at $134.75. Cash cattle markets are still undeveloped for the week, which is not a surprise to any at this point. Asking prices and bids are still unavailable, with more activity likely to slowly trickle into the market through the next couple of days. Trade for the week is likely to be pushed off until Wednesday or later, but the focus on building on steady to firm prices last week continues to be the emphasis of cattle feeders. Showlists appear to be smaller through most areas with slightly lower offerings reported in Nebraska and Colorado, while Kansas and Texas are posting lower show list totals for the week. It is still too early to tell if this tightness in offered cattle supplies will stimulate initially higher bids, or if packers will buy what they can at steady money and push additional needs into November. The Five-Area Weekly average price moved above $124 per cwt, at $124.39 per cwt. This is $0.55 per cwt above the previous week, confirming the continued slight upward shift in cash markets over the last three of weeks.
Monday's slaughter is estimated at 122,000 head, 2,000 more than a week ago and 6,000 more than year-ago totals.
Boxed beef prices closed higher: choice up $1.22 ($283.04) and select up $0.08 ($263.19) with a movement of 136 loads (69.68 loads of choice, 22.17 loads of select, 33.83 loads of trim and 10.60 loads of ground beef).
TUESDAY'S CASH CATTLE CALL: Steady. Cash cattle markets are still expected to remain quiet early Tuesday morning, as both sides look for additional interest to develop through the first half of the week. Trade is likely to remain delayed until Wednesday or later. Feeders are looking for steady to higher price levels given cash market stability over the last few weeks.
FEEDER CATTLE:
Feeder cattle futures aggressively regained a portion of last week's market losses, although overall interest in the complex faded as the day continued. November and January contracts spent most of the session $2 to $2.50 per cwt higher, closed at about half of these early day gains as traders continue to look for additional support through the rest of the week. Support following lower than expected cattle placement levels in Friday's cattle on feed report was the main spark behind the Monday rally. Traders had anticipated a bearish report all last week, adding to the downward market spiral seen over the last week. The ability to build on current support levels in all nearby feeder cattle contracts will be essential in order to stimulate technical buying interest through the end of the month. Limited pressure in corn trade during early week trade is also creating caution to feeder cattle traders who are very attuned to changes in production costs. October feeders closed $0.20 higher at $155.62, November feeders closed $1.57 higher at $158.47 and January futures closed $1.25 higher at $158.57. The CME Feeder Cattle Index for Oct. 22: $155.89, up $0.78.
LEAN HOGS:
Lean hog futures focused on price stability Monday with light to moderate gains spilling over from the cattle complex into nearby futures. Deferred contracts still posted moderate losses as traders remain concerned about the ability to sustain and grow pork demand. Volatile moves in wholesale pork prices over the last couple of weeks has not subsided, creating lack of confidence from buyers, who at this point are comfortable hovering on the sidelines. Following last week's price tumble of nearly $5 per cwt, the underlying weaker market trend continues. Through the last week of October, traders appear to be searching for support levels on which to hopefully build through the month of November. Even though the market continues to remain oversold, a significant shift in market fundamentals will need to develop in order to spark sustained and substantial market gains in the near future. December lean hogs closed $0.87 higher at $74.20, February lean hogs closed $0.15 higher at $76.77 and April lean hog futures closed 0.20 lower at $80.67. Pork prices shifted lower following a $18.86 per cwt loss in ham cuts and $7.61 per cwt loss in butt prices. Strong belly price gains could not overtake the general pork market weakness Monday. Pork cutouts totaled 375.86 loads with 323.51 loads of pork cutouts and 52.35 loads of trim. Pork cutout values: down $3.69, $94.58. Monday's slaughter is estimated at 478,000 head, 6,000 higher than a week ago and 9,000 lower than a year ago. The CME Lean Hog Index for Oct. 22: down $0.72, $82.98.
TUESDAY'S CASH HOG CALL: Steady. Continued volatility in futures trade and pork cutout values is adding further concern about the ability to rally cash hog prices through the last week of October.
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