GENERAL COMMENTS:
Active selling pressure developed in most ag commodity markets Tuesday, with live cattle and lean hog futures no exception to the overall weaker market shift. Lean hog futures quickly led the complex lower, with December futures closing $2 per cwt lower after consistent market pressure during the entire month of October. December lean hog futures have given back over $7 per cwt in the last two weeks but remains well above recent pre-rally lows. Live cattle futures eroded Tuesday, with concerns of larger than expected beef production levels over the next year offsetting previous market support. Weakness in corn and soybean markets helped spark buying in most feeder cattle futures Tuesday. Hog prices moved higher on the National Direct Afternoon Hog Report in active trade, gaining $0.49 with a weighted average of $69.11 on 9,266 head. December corn is down 10 1/2 cents per bushel and December soybean meal is down $4.10 per ton. The Dow Jones Industrial Average is down 54 points and NASDAQ is down 7 points.
LIVE CATTLE:
Firm pressure developed in live cattle trade Tuesday with the bulk of selling pressure seen following the morning release of the October WASDE report. USDA projects a shift higher in overall 2021 and 2022 production compared to last month's report, which took traders by surprise and allowed for active losses to develop in nearby contracts. December futures were the most impacted, falling below $130 per cwt. This pullback in prices may signify more than just a change in overall production levels, but it could signal the potential end of the two-week rally, which pushed live cattle futures more than $5 per cwt higher. Traders not only are trying to define long-term supply and demand direction, but short-term technical trading ranges are also being sought by many traders who have re-entered the market over the past two weeks. Beef production in the October WASDE report was reversed from earlier reports posting reductions, to a sizable gain in the morning report. Beef production in 2021 increased 90 million pounds from the September projection, also showing significant increases in 2022 of 120 million pounds. The October estimate posted expectation total beef annualized beef production in 2021 of 27.8 billion pounds, up from 27.7 billion pounds last month. Even with the current shifts in projections beef production in 2022 is still projected to have a significant pullback from 2021 levels with next year overall production expected to fall 837 million pounds from current year estimates. This will likely add even more long-term volatility to the live cattle and feeder cattle markets over the upcoming weeks and months. October live cattle closed $0.60 lower at $125.02, December live cattle closed 0.92 lower at $129.25 and live cattle closed $0.62 lower at $134.25. Cash cattle markets remain quiet Tuesday afternoon with packer inquiry near a standstill. This is not surprising for a Tuesday, although it is still possible that limited trade could still be seen before the end of the day. Most activity is likely to be pushed off until Wednesday or later, when it is expected packer interest will increase significantly. Asking prices in the South are starting out at $125 to $126 live basis, and still relatively undeveloped in the North. The CBP Texas Cash Pool reported 307 head today at $124.15, other bids were $123.52 and $124.00. Last week's five-area weekly steer average price was $122.96 per cwt. $0.40 higher than the week before. The gain itself is not as significant as the change in direction of the market. This move higher is the most significant price increase in the last seven weeks, potentially signaling that seasonal lows have been set.
Tuesday's slaughter is estimated at 120,000 head, 2,000 less than a week ago and year ago totals.
Boxed beef prices closed lower: choice down $0.05 ($281.07) and select down $2.29 ($261.35) with a movement of 177 loads (71.77 loads of choice, 43.27 loads of select, 16.40 loads of trim and 45.67 loads of ground beef).
WEDNESDAY'S CASH CATTLE CALL: Steady. Feeders are looking for steady to higher price levels once again, although interest by packers is far from spectacular at this point in the week. Packer interest is expected to improve through the day Wednesday, with the recent trend that moderate midweek trade may set the tone for the week.
FEEDER CATTLE:
Feeder cattle futures closed mixed Tuesday as spot month October futures quickly followed the direction of other livestock markets, live cattle trade in particular, while the rest of the complex focused on sharp losses in corn and soybean markets following the WASDE report Tuesday morning. The most aggressive support in feeder cattle trade came in January through April futures. This not only focuses on cattle finished and going to market at the end of 2022, but it also bypasses current feeder cattle expected to move into feed yards in the upcoming months. This creates some underlying concern for developing feeder cattle sales over the next several weeks and may limit upside cash feeder cattle sales prices in the near future. October feeders closed $0.75 lower at $158.57, November feeders closed $0.07 higher at $161.80 and January futures closed $0.6 higher at $162.77. The CME Feeder Cattle Index for Oct. 11: $154.15, up $0.53.
LEAN HOGS:
Sharp losses redeveloped in all lean hog futures Tuesday as continued weakness developed across the entire complex. December futures led the market lower with a $2 per cwt loss. The early market losses were accelerated by the October WASDE report, which posted moderate to strong pullback in total use of pork in 2022. The concern is that further demand pressure from a combination of weaker exports and domestic market pressure will offset any losses in production in the coming year. It is still important to point out that lean hog prices are well above recent September lows, but traders have recently cut the market rally in half with steady market pressure in most nearby and deferred contracts. Pork production is expected to be significantly cut during 2022 as reported in the October USDA WASDE report released Tuesday morning. Although estimates of current year production have been curbed slightly from the September report. Pork production in 2021 is projected at 27.67 billion pounds, down 65 million pounds from the September projection. The most aggressive and shift impacting long-term price levels is seen in 2022 production levels, as pork production is estimated at 27.5 billion pounds, compared to 28.1 billion pounds in the September report. This is a reduction of 560 million pounds based on overall hog herd size shifts. October lean hogs closed $0.87 lower at $89.07, December lean hogs closed $2.00 lower at $78.17, and February lean hog futures closed $1.82 lower at $81.25. Pork prices tumbled lower once again following strong pressure in picnic and ham cuts although overall trade was very active. Pork cutouts totaled 434.35 loads with 391.13 loads of pork cutouts and 43.21 loads of trim. Pork cutout values: down $5.63, $102.38. Tuesday's slaughter is estimated at 477,000 head, 1,000 more than a week ago and down 16,000 from a year ago. The CME Lean Hog Index for Oct. 11: down $0.66, $90.94.
WEDNESDAY'S CASH HOG CALL: Steady to $1 lower. Developing pressure in futures trade once again combined with general unsettled movements in negotiated cash hog prices and pork cutout values over the last couple weeks, limiting support for higher moving cash markets midweek.
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