GENERAL COMMENTS:
Initial strong gains in cattle futures created increased hope that active buyer support would retract some or most of the report pressure seen over the last couple of days. Most of the initial buying was reactionary based, and very short-lived due to limited buy orders developing.
Spot month contracts traded higher through the day with live cattle and feeder cattle futures ending the day with triple-digit gains. However, the optimism was limited as most other contract months traded lower at several times during the Tuesday session.
Given the mixed price moves, it appears that cattle markets may have found temporary stability as traders try to assess how the recent supply issues will impact market fundamentals and beef values.
Hog prices are mostly lower as continued technical weakness is limiting buyer interest across the entire complex. Hog prices closed lower on the Daily Direct Afternoon hog report, down $0.84 with a weighted average of $72.58 on 7,052 hogs. December corn closed down 6 1/4 at $4.84 and December soybean meal closed up $13.70 at $434.2. The Dow Jones Industrial Average is up 204.97 at 33,141.38.
LIVE CATTLE:
Early gains in live cattle futures pushed to triple-digit gains, creating the impression that buyers were ready to step back into the market following the recent price tumble surrounding the cattle on feed report. However, these gains were short-lived with October and December contracts the only nearby futures to hold positive price moves at the end of the session. Although there seems to be a much more stable market environment Tuesday, the inability to show significant market support and price advances, could lead to the current price range of $178 to $180 per cwt being the new market target.
There is still some uncertainty about how much long-term change in supply will develop, which will lead traders eagerly looking forward to upcoming on-feed reports in the weeks and months to come. Cash cattle trade is still generally quiet Tuesday afternoon, which is not surprising. There are reports of very light scattered trade in the South at $180 to $182 per cwt. There are a few bids of $290 per cwt still available in the North, although asking prices are not fully available with feeders trying to assess the market following the recent futures market tumble.
Mandatory reported a surprising 10,335 head sold Monday, mostly live deals that were marked at $182.50 to $185, some dressed business was done at $291. Given this activity for the first couple of days, the week could see trade trickling into the market with no sense of late week push as is typically seen. October live cattle closed $1.75 higher at $180., December live cattle closed $0.28 higher at $178.625 and February live cattle closed $0.13 lower at $180.85. Tuesday's slaughter is estimated at 126,000 head, 1,000 head less than a week ago and 4,000 head less than a year ago.
Boxed beef prices closed higher: choice up $1.44 ($305.98) and select up $2.98 ($284.) with a movement of 100.54 loads (61.07 loads of choice, 20.68 loads of select, 4.33 loads of trim and 14.46 loads of ground beef).
WEDNESDAY'S CATTLE CALL: $1 to $4 lower. Cash cattle trade is starting to trickle in early in the week. Given stability in spot futures trade, feeders may be able to limit the cash market losses as the week continues, although trade may be slow to develop over the next couple of days.
FEEDER CATTLE:
Feeder cattle futures followed the early move in live cattle Tuesday morning with active gains. However, this buyer support remained limited and short-lived, lending way to moderate pressure through most of the day in all but front-month contracts. Even though October futures closed with triple-digit gains, the general tone of the market still remained generally weak given the November through May contracts closed lower for the day.
The deviation from triple-digit losses, as seen over the last few trading sessions, can be viewed as a moral victory, with the expectation that markets seem to be gaining much more stability as the week continues.
Cash feeder cattle prices on the Oklahoma City Auction earlier in the week posted steers and heifers selling $4 to $8 per cwt lower than the previous week. There were some later heifer sales posted as much as $15 per cwt lower, with overall demand light to moderate at best. The sharp losses in futures trade is attributed to the strong price pressure.
October feeders closed $1.80 higher at $239.425, November feeders closed $0.38 lower at $235.425 and January feeders closed $0.85 lower at $234.85. The CME Feeder Cattle Index for Oct. 20: down $1.44, $242.12.
LEAN HOGS:
Lean hog futures continued to erode Tuesday, although spot December contracts were able to etch out a narrow gain. Other contracts posted active losses and continued the price shift lower. The market continues to remain technically weak with prices establishing contract lows, and despite any support that is developing in cash or pork values, has been unable to regain enough interest to establish a strong market bottom. December lean hogs closed $0.20 higher at $66.375, February lean hogs closed $0.73 lower at $69.475 and April lean hogs closed $1.05 lower at $75.55. Tuesday's hog slaughter is estimated at 483,000 head, 0 head less than a week ago and 9,000 head less than a year ago. Pork Cutouts totaled 351.84 loads with 306.34 loads of pork cuts and 45.50 loads of trim. Pork cutout values are down $1.96 at $86.59. The CME Lean Hog Index for Oct. 20: down $0.72, $79.07.
WEDNESDAY'S HOG CALL: Steady to $1 lower. Packers continue to remain moderately aggressive as they source hogs through the week, but given the recent softness in lean hog futures, cash hog prices and pork cutout values, it is expected that offers will continue to be eroded midweek and still able to secure enough hogs to meet current demand.
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