GENERAL COMMENTS:
Livestock futures continue to move away last week's price direction with steady this week in all cattle contracts; lean hog futures are backing away from the huge gains of late September. Triple-digit market swings are seen again Wednesday, although given the movement in the complex over the last couple of weeks, these price shifts are a long way from triggering any significant technical market direction. Outside markets remain variable with stock prices unsettled. The Dow Jones Index has continued to trade back and forth in a wide, triple-digit range every day for nearly a week. The inability to confirm and sustain the previous days market shift is creating even more uncertainty and confusion through the market and adding price volatility to the commodity complex. December corn is down 3 3/4 cents per bushel and December soybean meal is up $1.00 per ton. The Dow Jones Industrial Average is down 363 points with Nasdaq down 61 points.
LIVE CATTLE:
Gains in live cattle futures have continued to develop as the week continues. Although spot October is leading the upward price surge with a 92 cent per cwt gain at midday, the rest of the complex has settled into a more sustainable and believable market climb with prices 30 to 60 cents higher. There is no doubt live cattle futures entered the week extremely oversold following aggressive market losses last week; but it appears buyers are remaining thoughtful and objective about regaining positions and the "slow but steady" approach seems to be working. Cash cattle trade is starting to slowly develop Wednesday morning in all areas. Trade in the South is seen at mostly $124 per cwt, which is steady with last week's average in Texas and $1 higher than the average in Kansas. The full range of trade is seen from $122 to $124 per cwt, but expectations are the majority of trade will fall near $124. Trade in the North is seen at $196 dressed basis. This is fully steady with last week and could spark additional late-week optimism. Once the dust settles, anything less than fully steady is likely to be viewed as extremely disappointing given the recent rebound in futures trade and expectations that prices are at or near seasonal lows. The Fed Cattle Exchange Auction on 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; Kansas 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 morning's boxed beef prices are lower in moderate trade, with choice cuts $0.13 lower at $287.58 and selects down $1.52 at $266.26 on a total count of 93 loads. Dow Jones estimated Wednesday's cattle slaughter at 122,000 -- 1,000 higher than a week ago, and 3,000 more than year ago levels.
FEEDER CATTLE:
Feeder cattle futures have taken the leadership role in cattle trade for the second straight trading day. November through April contracts hold $1 gains at midday, sparking renewed underlying support through the entire complex. Although it was obvious that last week's selling was overstated and driven more by emotional selling than fundamental or technical indicators, the gains seen in the market over the last couple of days may have overcorrected the market shift, as noncommercial buyers remain reluctant to step into the market at this point. Long-term market direction is expected to remain above $160 per cwt; but nearby trade may continue to focus on price volatility and wide market swings more than long-term fundamental support. October traditionally has the most price pressure from spring calves as feeder cattle sales move into full swing. Prices over the last week are quoted as "unevenly steady," hovering $5 lower to $2 per cwt higher in most areas. Regional supply and demand is likely to play a major role in how cattle sell over the next couple of weeks, potentially skewing overall market direction starting out the 4th quarter of the year. The CME Feeder Index was priced at $152.79 for Oct. 4.
LEAN HOGS:
The early October market slide in lean hog futures has reached its third consecutive day with triple-digit losses in all contracts at midday. Even though lean hog futures have fallen as much as $4 per cwt in early week trade, this pullback is still technically considered a market correction and not a reversal due to the aggressive upward swing seen over the previous two weeks. December futures are holding $1.20 per cwt losses Wednesday morning, but priced at $81.37 per cwt. If prices continue to erode and move through the $80 per cwt price level, more attention will be given to the current market pressure. Wild market swings are seen throughout commodity and financial markets over the last few days, which is adding to the overall uncertainty, but in some ways discounting the overall market direction with a "just wait for tomorrow" mentality starting to develop in many markets. Firm price pullbacks in ham cuts pushed pork cutout values lower Wednesday. Cutouts are down $4.27 at $108.13 Wednesday morning on 341.51 loads. Negotiated hog prices are $1.26 lower at 70.03 per cwt on 6,193 head. The swine/pork market formula price is listed at $91.50 per cwt. Dow Jones estimated Wednesday's hog slaughter at 478,000 -- 2,000 more than a week ago and 12,000 less than year ago levels. The CME Lean Hog Index is listed at $93.51 per cwt for Oct. 5.
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