GENERAL COMMENTS:
Livestock futures posted another day of cattle futures testing additional upward movement, while hog trade is focused on retracting prices from last week's highs. Although significant price moves were seen during the day, the volatility in the market appears to be slowly fading day to day, potentially leading to further long-term support in all markets. Traders will not only focus on end of the week meat values, but export sales reports released early Thursday morning is likely to pay a role in early trade volume. Hog prices moved lower on the National Direct Afternoon Hog Report in moderate trade, falling $1.25 with a weighted average of $70.01 on 8,001 head. December corn is down 5 1/4 cents per bushel and December soybean meal is up $1.50 per ton. The Dow Jones Industrial Average is up 102 points and NASDAQ is up 68 points.
LIVE CATTLE:
Spot October live cattle futures led the live cattle market higher Wednesday with firm underlying support developing across the complex. Even though steady gains have developed through the week, cattle trade still remains in a "catch-up" mentality as prices continue to battle back from last week's losses. Traders are attempting to build some additional buyer support back into the live cattle complex as the focus on stability in beef values and potential that prices have reached seasonal lows is helping to stimulate additional market interest. December through April futures posted most of the activity during the session with prices posting light to moderate gains of 32 to 52 cents per cwt. December futures are holding $3 per cwt above recent lows set last week. It is very likely that, without a major disruption to supply issues, this support level will hold through the rest of the year. This would help build additional buyer confidence in all live cattle contract months. October live cattle closed $1.00 higher at $123.82, December live cattle closed $0.37 higher at $128.22, and February live cattle closed $0.42 higher at $133.17. Cash cattle trade started to develop Wednesday with light to moderate trade volume seen in most areas through the day. Deals in the South were market mostly $124 per cwt with the range from $122 to $124 per cwt. This is steady with trade in Texas last week, but about $1 per cwt higher than Kansas average prices. Trade in the North was seen at $196 per cwt dressed basis, which is fully steady with last week. Although it is reassuring that packers are becoming active midweek, the lack of upward movement in price levels in several areas is somewhat concerning. Over the last month, Wednesday trade has gone a long way in setting the tone for the rest of the week, so it will be interesting to see if prices through the rest of the week deviate from the trade already taking place during the day. It is likely that more trade will need to be done in the next two days. Asking prices on cattle remain firm at $125 to $126 in the South and $198 and higher in the North. The Fed Cattle Exchange Auction Wednesday listed a total of 3,449 head, of which 414 actually sold, and 3,035 head were listed as unsold, as they did not meet the reserve prices that ranged from $122 to $126. Opening prices ranged from $120 to $124, high bids ranged from $121 to $124.25. The state-by-state breakdown looks like this: Texas 1,370 total head, with 295 head sold at $124.25, 1,075 head went unsold; KS 897 total head, all of which went unsold; Nebraska 938 total head, all of which went unsold; Oklahoma 244 total head, with 119 head sold at $123.00, 125 head went unsold.
Wednesday's slaughter is estimated at 121,000 head, 5,000 more than a week ago and 2,000 more than year ago totals.
Boxed beef prices closed lower: choice down $1.09 ($286.62) and select down $4.87 ($262.91) with a movement of 157 loads (86.02 loads of choice, 27.83 loads of select, 14.05 loads of trim and 28.77 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Steady. Midweek trade developed in most areas once again. Prices are generally steady with last week's trade, although additional deals are likely to develop over the next two days. The focus on steady to firm price levels has been the anticipation going into the week, but prices will have to firm with additional trade in order to meet these expectations.
FEEDER CATTLE:
Feeder cattle futures emerged as the big livestock market winner once again with triple-digit gains holding through closing bell in most contracts. November through April futures posted the most aggressive price support with traders still trying to adjust following last week's losses and uncertainty as to just how much long-term impact larger placements will have on overall feeder cattle price levels. It appears that prices may be starting to stabilize with prices moving closer to $160 per cwt. Traders are looking for the complex to establish a more defined market range in which increased confidence can be built upon. The significant losses seen during September has liquidated many positions in the complex, leaving some traders on the sidelines. Although a portion have reentered the market over the last couple days, there remains many unwilling to yet commit to the market. Some of these traders may only move back into the market once volatility has eased. Lack of market premium in the complex until summer 2022 contracts is also adding to the lackluster interest by some traders. This could limit further trade volume in the last half of the week. October feeders closed $0.70 higher at $156.80, November feeders closed $1.25 higher at $158.12 and January futures closed $1.50 higher at $158.77. The CME Feeder Cattle Index for Oct. 5: $152.88, up $0.09.
LEAN HOGS:
Lean hog futures posted another day of losses, bringing the loss streak to three days at this point and creating further evidence that traders are confident about pulling back from active and aggressive gains which developed last week. Nearby contracts have pulled back $3 to $4 per cwt from recent highs, but it is very important to remember that prices are still $8 to $9 per cwt ahead of where they were just two weeks ago. The change in inventory and expected pork production continues to be a big deal, but given the current market situation, most would agree that the sizable market swings over the last two weeks were rather unexpected. Given the volatility still working itself out of the market at this point, very little technical or fundamental support is being given to the current market slide. As mentioned before, with December futures holding above $80 per cwt, limited widespread long-term market positioning is likely to be seen. Traders will closely monitor weekly export sales reports Thursday morning. This could create another spark of market interest and likely add increased movement to the already volatile markets. October lean hogs closed $1.35 lower at $89.62, December lean hogs closed $0.82 lower at $81.72, and February lean hog futures closed $0.87 lower at $84.12. Pork prices shifted higher based on strong double digit gains in ham cuts on the afternoon report. Pork cutouts totaled 288.56 loads with 234.95 loads of pork cutouts and 53.60 loads of trim. Pork cutout values: up $4.73, $112.86. Wednesday's slaughter is estimated at 478,000 head, 14,000 more than a week ago and down 13,000 from a year ago. The CME Lean Hog Index for Oct. 5: down $0.60, $93.51.
THURSDAY'S CASH HOG CALL: Steady. Continued pullback in lean hog prices through the first three days of the week and lack of stable gains in pork values has left cash markets sluggish at best. Packers are expected to offer steady to lower prices early Thursday, although the general tone of the market is likely to remain stable.
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