Thursday Midday Livestock Market Summary - Cattle Prices Falling on First Day of Fall

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.

Thursday Morning Livestock Market Update - Futures May Continue to Struggle

GENERAL COMMENTS:

Live cattle tried their best at holding onto positive territory, but futures succumbed to selling pressure, pushing prices into negative territory. The Fed raising interest rates by 75 basis points may have been one reason for the pressure. However, the market had known this was going to happen and was likely prepared for it already. However, it seems the actual rate increase and the impact it could have on demand along with the upcoming Cattle on Feed report put pressure on the market. The fate of the cash market will be revealed Thursday as trading should take place. Expectations are for higher cash, but the extent of the gain is uncertain. However, continued weakness of boxed beef makes cash strength uncertain. Choice cuts were down $2.51 and select down $1.09. Weekly export sales Thursday morning will indicate the level of international demand.

Hog futures fell from the impact of significantly lower cutouts. The Wednesday morning report pointed to lower cutouts and that is what the final was at the end of the day with price falling $4.60. The National Direct Afternoon Hog report showed cash up $0.98, which provided some support. The recent uptrend ran its course with weakness intensifying as traders liquidated positions. It may be difficult to regain the losses of Wednesday anytime soon. Slaughter pace remains strong with hog supplies plentiful. Weekly export sales will need to be good or further liquidation may unfold. Saturday slaughter is estimated at 136,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle are expected to trade Thursday with prices higher than last week. That would at least maintain futures near the current level.	1)	Live cattle futures have not been able to break above the highs, leaving that as a level of resistance.
2)	Even though some cattle are committed for slaughter this week, packers will need to maintain a little cushion. This should keep them aggressive.	2)	Increased interest rates and the higher U.S. dollar may have an impact both on domestic and international demand.
3)	Aggressive buying of hogs this week indicates packers were short bought as slaughter pace remains strong.	3)	The weakness of hog futures Wednesday may be difficult to regain anytime soon. The weakness of cutouts triggered the selling.
4)	Hog futures fell back Wednesday but it was not widespread selling. It might have been profit-taking rather than a change in trend.	4)	Year-to-date imports of pork by China are down 63.6% from the same period a year ago.

Wednesday Closing Livestock Market Update - Interest Rate Hike Jolts Dollar; Livestock Prices Sink

GENERAL COMMENTS:

Some of the livestock contracts' heaviest trading volume Wednesday occurred in the last five minutes of the session, as widespread markets reacted to the Federal Reserve's new target fed funds rate of 3.0% to 3.25%, a 0.75-percentage-point rate hike. The stock market dropped and the U.S. Dollar Index was up over 1.25 points in response. Nearby lean hog futures led the losses in the livestock sector and the cattle markets were also lower at the close. Cash cattle have seen no trade so far this week, but asking prices are around $145 to $146 in the South. December corn closed down 6 1/2 cents at $6.85 1/2 per bushel and December soybean meal closed down $0.60 at $438.80 per ton. The Dow Jones Industrial Average is up 240 points.

LIVE CATTLE:

Live cattle futures were lower most of Wednesday, staying off Tuesday's fresh contract highs, and when the Federal Reserve gave a nod to inflation pressures with a 0.75-percentage-point rate hike Wednesday afternoon, the cattle market kept its head down. October live cattle closed $0.425 lower at $145.875, December live cattle closed $0.325 lower at $150.75, and February live cattle closed $0.30 lower at $154.90. This outside market volatility from bonds and currencies might not sting so much if it weren't for the steadily eroding boxed beef values which hint at consumers' willingness to shy away from restaurant meals and higher-priced cuts in uncertain economic times. The choice cutout has slipped almost $20 per cwt since the start of August, and the choice-to-select spread has generally been narrowing. Nevertheless, in coming days, cattle futures traders are more likely to focus on the supply side of things in the upcoming Cattle-on-Feed report, which is expected to show roughly the same Sept. 1 number of cattle on feed as a year ago, after a diminished beef herd contributed a lower quantity of August placements (estimated down 1.5% from last year). The front-month chart remains within 25 cents of its recent high and could easily explore fresh levels while traders position themselves in anticipation of this news. Cash cattle trade remains quiet so far this week, but some asking prices are around $145 to $146 in the South (which would be $3 to $4 higher than last week), and are 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. 

Wednesday's slaughter is estimated at 128,000 head -- 1,000 head more than a week ago and 8,000 head more than a year ago.

THURSDAY'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:

Amid a relatively low volume of futures trade Wednesday, feeder cattle weren't able to hold onto gains. October feeders closed $0.80 lower at $179.225, November feeders closed $0.95 lower at $180.325, and January feeders closed $0.925 lower at $181.975. Corn prices actually pulled back from their Tuesday highs, but October soybean meal just kept churning to a fresh contract high Wednesday ($458 per ton), so putting a price on ration ingredients continues to be a challenge for cattle-feeding businesses. Cash trade for calves at sale barns across the countryside remains seasonally pretty quiet, but it's the eerie quiet before a storm, i.e. the upcoming fall run. Where the market has been tested so far, demand has been characterized as good.

LEAN HOGS:

Prices in the pork and hog markets have been fast-moving targets this week and Wednesday the lean hog futures contracts joined in that volatile action with triple-digit losses. October lean hogs closed $1.55 lower at $94.425, December lean hogs closed $1.725 lower at $86.45, and February lean hogs closed $1.50 lower at $90.65. In order to achieve impressive slaughter numbers in recent days, packers have been bidding up the hog market at a blistering pace this week -- $5 higher in Tuesday's afternoon hog report and higher Wednesday morning, too. However, similar volatility has been noted in pork products, but to the downside, with bellies, loins, and ribs all seeing a seasonal hit Wednesday. Together, these two phenomena eat away at packers' margins, but low-margin/high-volume has often been the name of the game, and with the U.S. swine herd expected to keep growing, it's just as well if the market can handle large throughput numbers, like the 482,000 head slaughtered Wednesday.

THURSDAY'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.

Wednesday Midday Livestock Market Summary - Cattle Markets Try to Moderate

GENERAL COMMENTS:

The livestock futures markets are mostly quiet through the first part of Wednesday's trading session, but outside market fireworks could spill over into the last five minutes of trade after the Federal Reserve's new interest rate target is announced in the afternoon. Live cattle futures contracts are staying off their fresh highs, feeder cattle futures are correcting some of Tuesday's losses, and lean hog futures are mostly lower. December corn is down 7 1/2 cents per bushel, and December soybean meal is down $0.70. The Dow Jones Industrial Average is up 171 points.

LIVE CATTLE:

Live cattle futures have been quietly mixed Wednesday morning as most outside markets take a breath after Tuesday's more volatile day. October live cattle are down $0.125 at $146.175, December live cattle are up $0.125 at $151.20, and February live cattle are up $0.20 at $155.40. Most markets are in waiting mode at midday Wednesday, and the cattle market is no exception: waiting for the Federal Reserve's interest rate hike, waiting for Friday's USDA Cattle on Feed report, and waiting for cash cattle trade to get going for the week. So far, cash bids remain elusive, but asking prices are around $145 to $146 in the South ($3 to $4 higher than last week's weighted average) and still not established in the North. The expectation is that trade volume won't develop until Thursday. Slowly eroding boxed beef values will eat away at packers' ability to meet these rising asking prices, despite their obvious desire to keep volumes high. 

Wednesday's slaughter is estimated at 128,000 head, which is 1,000 more than a week ago and 8,000 more than a year ago at this time.

Boxed beef prices are mixed Wednesday morning: choice down $1.57 ($250.07) and select up $0.36 ($227.59) with a movement of 119 loads (54.66 loads of choice, 21.11 loads of select, 14.34 loads of trim and 28.69 loads of ground beef).

FEEDER CATTLE:

On the official last day of summer, the feeder cattle market must be looking ahead to the fall calf sales, and knowing that demand will be keen, heading upward to correct Tuesday's big losses. October feeders are up $0.275 at $180.30, November feeders are down $0.075 at $181.20 and January feeders are down $0.20 at $182.70. The CME Feeder Index, reflecting weighted average prices for 700- to 900-lb steers from salebarns across the countryside, has dipped below $180 through the past week, but for many lighter-weight calves, order buyers are still having to write a $2 in front of their bids. And as the upcoming Cattle on Feed report will show, the available calves coming from the droughty West are skewed toward lighter weights.

LEAN HOGS:

Hog futures contracts are consistently lower across the calendar Wednesday morning, although futures trading volume has remained quiet so far. October lean hogs are down $1.15 at $94.825, December lean hogs are down $1.55 at $86.625, and February lean hogs are down $1.30 at $90.85. Traders should be watchful for more frantic trade and have their positions hedged ahead of the last five minutes of trade today, with the Federal Reserve's new target interest rate announcement expected at 2 p.m. Eastern (1 p.m. Central). Now that certain overwhelming export markets are less of a driver for the U.S. pork market, domestic economic health and consumer spending may be a main influence on pork and hog prices, with any threat of recession putting restaurant meals and meat counter purchases in question. But so far, so good from the demand side: Packing plants have been ramping up their hog slaughter pace in recent weeks, and Wednesday's slaughter is estimated to be another big day: 482,000 head, which is 3,000 more than last week and 12,000 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 higher again in Wednesday's Daily Direct Morning Hog Report, with the weighted average price $95.28 up $1.02 on 9,010 head. Base prices ranged from $86 to $103.50, bringing the 5-day rolling average to $93.65. Pork cutouts total 155.97 loads with 133.31 loads of pork cuts and 20.66 loads of trim. Pork cutout values: down $4.58, $100.37.