GENERAL COMMENTS:
Cattle markets were the focus through the entire session Monday. Traders had the weekend to digest the bearish news in the Cattle on feed report, and this led to widespread pressure through the entire session. With live cattle and feeder cattle futures each posting limit losses in at least one nearby contract, it allows for expanded trading limits Tuesday. The concern that follow-through runaway liquidation will continue to the market technically, as well as the outlook of fundamentals over the near future, is creating anxiety across cattle country. Lean hog futures remained silent in comparison to cattle trade with prices mixed in a narrow range and light activity. Hog prices closed higher on the Daily Direct Afternoon hog report, up $3.85 with a weighted average of $73.42 on 2,260 hogs. December corn closed down 5 1/4 at $4.903 and December soybean meal closed down $3.40 at $420.5. The Dow Jones Industrial Average is down 190.87 at 32,936.41.
LIVE CATTLE:
The October through June 2024 contracts all closed with losses of $6 per cwt or greater. This move pushed October futures to a nearly four-month low, and caused some additional widespread weakness to develop on the nearby chart. Prices have fallen $9 from September highs, and following Monday's market tumble, there are significant questions just where support levels will hold. The increased placement and total cattle on feed number is surprising, but there are also more questions than answers following the report and market reaction. The higher numbers do not prove that overall supply is significantly increased, but does raise questions of just how solid market expectations are given more calves moving into the feedlot system. As traders return to the market Tuesday morning, they will have access to a $10 per cwt contract limit in all contract months, potentially creating even more volatility through the cattle market. Cash cattle trade is quiet Monday afternoon with asking prices and bids still undeveloped. Showlists are mixed, higher in Texas while lower in Kansas and Nebraska/Colorado. Given the futures market volatility, it is likely that trade will be delayed until some stability is seen. October live cattle closed $6.03 lower at $178.25, December live cattle closed $6.28 lower at $178.35 and February live cattle closed $6.75 lower at $180.975. Monday's slaughter is estimated at 125,000 head, 1,000 head more than a week ago and 5,000 head less than a year ago.
Boxed beef prices closed higher: choice up $1.26 ($305.38) and select up $1.22 ($278.7) with a movement of 139.95 loads (82.84 loads of choice, 23.53 loads of select, 9.88 loads of trim and 23.70 loads of ground beef).
TUESDAY'S CATTLE CALL: Steady to $2 lower. Trade interest Tuesday in the cash market is still expected to be limited, potentially pushing sales to the last half of the week. It is hard to imagine that the aggressive losses in futures trade will not have an impact on cash trade, although packers will continue to need to find adequate supplies to keep plants active.
FEEDER CATTLE:
Sharp losses in feeder cattle futures focused on continued pressure developing from Friday's cattle on feed report. Although feeder cattle prices tumbled lower late last week in anticipation of this report, traders still felt that the market had not accounted for the entire bearishness of the report. It is likely that some of the pressure seen Monday is focused on emotionally driven technical selling, but when prices continue to ratchet steadily lower through the day, it is impossible to expect buyer interest to develop. Following limit closes in January contracts, the entire feeder cattle futures complex opened up the possibility to expanded trading limits Tuesday. This means that feeder cattle prices will be able to move $12.25 per cwt without a market stop. According to the USDA National feeder cattle summary, feeder cattle prices last week were generally $2 to $5 per cwt higher than the previous week with moderate to good demand. It is still uncertain just how much of an impact the sharp losses in futures prices will have on short-term cash feeder cattle trade as feeders are focusing on gaining access to high quality cattle and increasing overall numbers. October feeders closed $4.20 lower at $237.625, November feeders closed $6.43 lower at $235.8 and January feeders closed $7.35 lower at $235.7. The CME Feeder Cattle Index for Oct. 19: down $0.43, $243.56.
LEAN HOGS:
Given the strong market pressure over the last three weeks in lean hog futures trade, the fact that prices moved very little Monday seems to be a moral victory. The trading session Monday had less to do with direction and activity in the lean hog market and more on widespread pressure in cattle markets, which sparked a general lack of interest for hog traders to actively participate Monday. The complex remains extremely weak, which is not helped by only slight to moderate gains in pork values. December lean hogs closed $0.18 higher at $66.175, February lean hogs closed $0.23 lower at $70.2 and April lean hogs closed $0.30 lower at $76.6. Monday's hog slaughter is estimated at 486,000 head, 6,000 head more than a week ago and 2,000 head less than a year ago. Pork Cutouts totaled 281.09 loads with 234.39 loads of pork cuts and 46.70 loads of trim. Pork cutout values are up $0.58 at $88.55. The CME Lean Hog Index for Oct. 19: down $0.66, $79.79.
TUESDAY'S HOG CALL: Steady. Steady cash hog markets are likely early Tuesday, although cash hog prices rallied Monday, the concern and focus on outside markets and pork values could limit gains as the week chugs along.
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