GENERAL COMMENTS:
The live cattle futures market may be looking for an excuse to keep testing fresh highs, and if widespread commodity inflationary bullishness doesn't do it an upcoming Cattle-on-Feed report on Friday might. On Tuesday, however, the futures price action was mixed. Feeder cattle futures were hit hard by the implications of higher feed prices. Cash cattle have seen no trade so far this week, but early asking prices are around $145 to $146 in the South. December corn closed up 13 3/4 cents at $6.92 per bushel and December soybean meal closed up $10.10 at $439.40 per ton. The Dow Jones Industrial Average is down 313.45 points.
LIVE CATTLE:
October live cattle futures haven't been this high since August 2015, but there's enough uncertainty in the overall economy to keep traders cautious going forward. October live cattle closed $0.575 higher at $146.30, December live cattle closed $0.175 higher at $151.075, and February live cattle closed $0.05 lower at $155.20. The market will trade in anticipation of Friday afternoon's upcoming Cattle-on-Feed report, which is expected to show roughly the same Sept. 1 number of cattle on feed as a year ago, but analysts are estimating August placements will be down 1.5% from last year, due to a smaller breeding herd. And of those placements, we should expect them to be lighter weight and more evenly skewed toward females while unrelenting drought continues to grip western cattle country. So, it's not exactly a bearish picture of overwhelming supply if packers were hoping to get any bargains in the near future. In fact, prices are about as high as they've been in the past seven years, although the cash market hasn't been tested yet this week. Some early asking prices are around $145 to $146 in the South (which would be $3 to $4 higher than last week), but still not established in the North, where dressed cattle traded for $226 to $227 last week. So long as processing speeds don't decline, packers are still going to need cattle.
Tuesday's slaughter is estimated at 128,000 head -- even with a week ago and 6,000 head more than a year ago.
Boxed beef prices closed mixed: choice down $0.81 ($251.64) and select up $1.34 ($227.23) with a movement of 145 loads (74.42 loads of choice, 40.43 loads of select, 0 loads of trim and 30.17 loads of ground beef).
WEDNESDAY'S CASH CATTLE CALL: $1.00 to $2.00 higher. Packers used the weeks surrounding the Labor Day weekend as an opportunity to brake-check the cash cattle market. But in doing so they also made it so they need to buy cattle now to ensure they'll have enough cattle to fulfill upcoming kills.
FEEDER CATTLE:
Double-digit gains in the corn futures market are almost always going to translate into a down day for feeder cattle futures, but the market for calves out in the country is nevertheless gearing up for a blistering fall run. October feeders closed $2.275 lower at $182.825, November feeders closed $2.25 lower at $183.90, and January feeders closed $2.075 lower at $182.90. Sale barns have yet to see big numbers of spring calves coming across the scale, but feedlots who want to stay full this winter had better be willing to close their eyes and pay $2 or better for lightweight calves. A Monday sale in Russell, Iowa, for instance, saw strong demand, and a representative load of steers weighing 575 to 595 lbs brought an average price of $202.51. The CME Feeder Cattle Index 9/19/2022: up $0.28, $178.20.
LEAN HOGS:
The cash prices that short-bought packers have had to pay for hogs this week have been popping higher, which is supportive to the futures market but not a long-term structural change. October lean hogs closed $0.50 lower at $97.45, December lean hogs closed $0.025 higher at $89.075, and February lean hogs closed $0.225 higher at $92.15. Futures traders may keep the market in a sideways trading range, particularly while the outside markets negotiate the inherent volatility of a widely expected Federal Reserve interest rate change on Wednesday. In the trenches of reality, however, it's all about demand, demand, demand, and packers are putting up big numbers. Tuesday's slaughter was estimated at an impressive 485,000 head, which is 9,000 head more than a week ago and 22,000 more than a year ago at this time. Pork cutouts totaled 347.31 loads with 314.18 loads of pork cuts and 33.13 loads of trim. Pork cutout values: down $0.70, $105.18. The CME Lean Hog Index for 9/16 was up $0.45 at $98.42 and the projected index for 9/19 is down $0.06 at $98.36.
WEDNESDAY'S CASH HOG CALL: Steady. Short-bought packers have eagerly bid up the cash market nearly $5 higher so far this week and may not have deep enough pockets for much more movement beyond what's already been seen.
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