GENERAL COMMENTS:
Futures traders have spent the morning selling off contracts and driving prices lower Thursday morning, but this activity may be more related to risk management of their overall positions than to any specific response to the supply-and-demand fundamentals of the markets. Live cattle futures contracts are about $0.50 lower, feeder cattle futures are down by triple digits, and lean hog futures are showing lighter losses. December corn is up 2 cents per bushel, and December soybean meal is down $10. The Dow Jones Industrial Average is down 52 points.
LIVE CATTLE:
Live cattle futures charts have pulled back from their recent highs during Thursday's trading session with lower prices across the board. October live cattle are down $0.45 at $145.425, December live cattle are down $0.725 at $150.025, and February live cattle are down $0.575 at $154.325. Some of the futures selling pressure Thursday morning may be attributed to speculators taking profits after the recent run-up or closing out risky positions ahead of Friday's upcoming Cattle on Feed report, which may confirm the bullish supply scenario, but market reactions are always uncertain. USDA reports negotiated cash sales for cattle on Wednesday afternoon took place out of Iowa, Minnesota and Nebraska at a weighted average price of $145, live basis. Dressed and delivered deals were marked anywhere from $226 to $229. This isn't the end-all of the week's business, but it's notable that packers have met these asking prices, which are $3 higher than last week's weighted average. Packers have had several weeks of extravagant spending now to keep their lines full, and Thursday's expected slaughter at 127,000 head is even with a week ago and 11,000 more than a year ago at this time. All that beef is headed toward a wholesale market where prices are stable or weakening, but fortunately, this week's export sales report showed an overall promising number (15,200 metric tons of net sales) despite worrisome slower trends from South Korea and Japan.
Boxed beef prices are mixed Thursday morning: choice up $0.03 ($249.16) and select down $1.05 ($225.09) with a movement of 83 loads (38.47 loads of choice, 22.25 loads of select, 5.94 loads of trim and 16.21 loads of ground beef).
FEEDER CATTLE:
Feeder cattle futures contracts have maintained a bearish trend on their charts so far this week. October feeders are down $0.425 at $178.80, November feeders are down $1.40 at $178.925 and January feeders are down $1.25 at $180.725. Open interest in the September contract, which trades for another week yet, has fallen to only about 1,640 contracts, but it is agreeably tracking toward convergence with the CME Feeder Index, which was $178.10 on 9/20. It's technically "fall" now, according to the calendar, but the yearly "fall run" of weaned spring calves coming through western salebarns won't really get started in earnest until October, when we'll see just how much appetite buyers have to fill feedlots this winter, even when cash corn prices are over $7 per bushel in many parts of the country, and soybean meal futures keep testing fresh contract highs, like the October contract hitting $463.70 per ton Thursday morning.
LEAN HOGS:
Lean hog futures traders are unapologetically following up Wednesday's losses with another serving of lower prices Thursday morning. October lean hogs are up $0.35 at $94.775, December lean hogs are down $0.125 at $86.325, and February lean hogs are down $0.30 at $90.35. The packers have been processing pork at a blistering pace in recent weeks, but fortunately, there seems to be several good outlets for the product. The weekly export sales report showed net sales of 29,000 metric tons, very close to the average pace of the past few weeks, with Mexico, Canada and China the top three buyers. Domestically, too, consumers are willing to pay for pork, and although the values for various cuts are volatile from day to day, the overall carcass value is generally supportive to the market. Wednesday's interest rate hike from the Federal Reserve is a reminder that inflation is still churning through the American economy, and likely not put to bed by just this one more 0.75 percentage point rate rise. Thursday's slaughter is estimated to be another big day: 482,000 head, which is 1,000 more than last week and 7,000 more than a year ago at this time.
The projected CME Lean Hog Index for 9/20/2022 is down $0.40 at $97.96, and the actual index for 9/19/2022 was down $0.06 at $98.36. Hog prices were lower in Thursday's Daily Direct Morning Hog Report, with the weighted average price $93.92 down $1.36 on 6,440 head. Base prices ranged from $84 to $105, bringing the 5-day rolling average to $93.42. Pork cutouts total 177.58 loads with 151.25 loads of pork cuts and 26.33 loads of trim. Pork cutout values: up $4, $104.35.
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