Monday Closing Livestock Market Update - Sharp Cattle Losses Develop

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.

Monday Midday Livestock Market Summary - Cattle Futures Tumble Lower

GENERAL COMMENTS:

Cattle futures were sharply lower Monday morning with most contracts holding losses of $3 per cwt or greater in both live cattle and feeder cattle trade. Friday's Cattle on Feed Report was more bearish than was expected and planned for with cattle placed during September increasing 6% from last year, well above analysts' expectations.

Even though traders took protection at the end of last week, given the numbers of cattle on feed and placed cattle in September, traders are trying to quickly adjust further expectations. This continues to be a very fluid and moving target, which could add further volatility over the next several days.

Hog futures were quiet Monday morning with traders keeping price in a narrow range on either side of unchanged, with most of the attention still focused on cattle markets. December corn is down 3 at $4.925 and December soybean meal is down $1 at $422.9. The Dow Jones Industrial Average is up 23.50 at 33,150.78.

LIVE CATTLE:

Sharp losses continue to develop through live cattle futures trade Monday morning. The bearish news from the Cattle on Feed Report, which posted cattle on feed numbers and placement numbers, were well over expected levels and September marketing of cattle was lower than expected, catching traders off guard, although a portion of pre-report protection already developed last week.

The bearish tone in the market continued to grow through the first couple of trade hours. What started out as a $2 to $3 per cwt loss at opening bell turned to $4 to %5 per cwt losses in some contracts. The downward pressure has so much emotion connected to the price swings at this point, it will be hard to determine where true market fundamentals will land once this emotional and technical market shift works through the complex.

Cash cattle markets are quiet Monday morning with show lists still being distributed throughout the morning. Trade last week actively developed on Thursday with most of the trade seen on Thursday. Southern live deals traded at $183 to $185.50 per cwt, which is $1 to $2 per cwt higher than the previous week. Northern dressed trade increased mostly $2 per cwt higher than the previous week at $294, although the range was $289 to $295.

Given the softness in futures trade, it is likely that early-week cash cattle market activity will be subdued. The Friday Afternoon Daily Direct Slaughter Cattle report lists week-to-date trade volume totals as KS 9,617; NE 22,910; TX 8,471; IA 32,303; CO not available due to confidentiality. October live cattle are $1.90 lower at $182.375 and December live cattle are $4.40 lower at $180.225. February live cattle are $5.00 lower at $182.725.

Boxed beef prices are higher: choice is down $0.42 ($304.96) and select up $3.84 ($282.54) with a movement of 45 loads (25.53 loads of choice, 5.43 loads of select, 3.58 loads of trim and 10.74 loads of ground beef).

FEEDER CATTLE:

Given the market pressure following Friday's Cattle on Feed report, it is not unexpected that feeder cattle contracts are showing significant losses Monday morning. Trade has held strong losses all morning, but at midday, prices were hovering from $3 to $4 per cwt lower in most contracts as trade weakness is seen through all late 2023 and most 2024 contracts.

The fact that losses in feeder cattle contracts are trailing the downward daily moves in live cattle trade is slightly surprising, but it is important to remember that feeder cattle contracts took the brunt of pre-report liquidation in front of the report release. It is hard to pinpoint given the last two Cattle on Feed Reports, the overall number of cattle that will move into feedlots for the year, but 2023 has turned out to be an early season of cattle placements.

This active move of cattle to feedyards during August and September is not totally shocking given the recent price levels and incentives that cattlemen have had to sell or deliver feeder cattle this year. Traders are likely to look for any sense of market stability throughout the entire cattle complex before actively stepping back into the market to buy.

October feeders are $1.48 lower at $240.35, November feeders are $3.43 lower at $238.8 and January feeders are $4.25 lower at $238.80.

LEAN HOGS:

Lean hog markets are the one ag commodity market that seems to be not in panic mode Monday morning. The lack of additional market direction, combined with the hemorrhaging of cattle futures seems to have created a sense of calm in all lean hog futures. At midday, prices are slightly higher, although during most of the morning, price levels have bounced higher and lower within a narrow trading range as traders seem to be adjusting positions with limited market interest. It is likely that lean hog trade will remain sluggish through most of the Monday session. December lean hogs are $0.43 higher at $66.425, February lean hogs are $0.05 higher at $70.475 and April lean hogs are $0.08 higher at $76.975.

Hog prices are higher on the Daily Direct Morning Hog Report, up $3.75 with a weighted average of $73.60, ranging from $66.50 to $74 on 1,855 head with a five-day rolling average of $73.08. Pork cutouts totaled 127.39 loads with 108.66 loads of pork cuts and 18.73 loads of trim. Pork cutout values are up $0.35 at $86.97.

Monday Morning Livestock Market Update - Negative Beginning to Week Expected

GENERAL COMMENTS:

The selling pressure last week was not the result of lower cash, as cash was $2.00 higher in the North and $1.00 to $2.00 higher in the South. That had little impact on trading as the emphasis was the Cattle on Feed report and the wide estimates for placements that increased uncertainty. Feeder cattle fell dramatically ahead of the report with the November contract down $9.35 for the week with $5.27 of that eliminated Thursday and Friday. This closed a chart gap that had remained from June 26. The Cattle on Feed report was bearish with on-feed numbers 1.2% above the average trade estimate at 101.0%. Placements were at 106%, up 4.4%, above the estimate and above the top end of the range. Marketings were slightly positive at 89.0%, 1.2% below the average estimate. It appears the highs will not be revisited again. Boxed beef prices were higher Friday with choice up $1.26 and select up $1.22. The Commitment of Traders report showed funds selling 2,753 contracts, bringing their net-long futures position to 83,417. Feeder cattle had a decrease of 615 long positions, bringing their net-long positions to 6,440 contracts.

Hog futures took it on the chin Friday with futures falling below support to new contract lows. Hogs might have seen some spillover pressure, but fundamentals remain bearish. The National Direct Afternoon Hog report showed a loss of $3.59, moving the weighted average below $70.00 with price down to $69.57. Cutouts were up $0.84 but had little impact and will have little impact on the market Monday. Packers did not need hogs on Friday, pulling back significantly. Futures contracts through May fell below support and established new contract lows. The Commitment of Traders showed a substantial change in fund-trader sentiment. Funds liquidated 13,531 contracts, bringing their net-long futures positions to 2,946 contracts.

	BULL SIDE		BEAR SIDE
1)	The cattle market may have the Cattle on Feed report factored in with the steep decline over the past week. Futures could rebound somewhat after a lower opening.	1)	Higher on-feed numbers and large placements will keep pressure on the market as there are more cattle around than expected. This will limit upside price potential.
2)	Higher cash and tight cattle supplies should provide support to the market once traders digest the numbers in the report.	2)	Feeder cattle futures have chart gaps below the market that may be filled at some point. The bearish implications of the Cattle on Feed report could provide further pressure and close those gaps.
3)	Hog futures are oversold and the recent liquidation may have run its course and provide technical traders with a reason to buy for a bounce.	3)	The weakness of cash hogs continues to pressure the market. Fund traders are now likely net short the market since the Commitment of Traders report was compiled last Tuesday.
4)	Low prices will cure low prices and current hog prices should stimulate demand, reduce production or both.	4)	Pork demand has not picked up sufficiently to support the market even at these lower prices.

USDA Oct. 1 Cattle on Feed Up 1%

OMAHA (DTN) -- Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.6 million head on Oct. 1, 2023. The inventory was 1% above Oct. 1, 2022, USDA NASS reported on Friday. This is the second-highest Oct. 1 inventory since the series began in 1996. The inventory included 6.95 million steers and steer calves, up slightly from the previous year. This group accounted for 60% of the total inventory.

Heifers and heifer calves accounted for 4.64 million head, up 1% from 2022.

Placements in feedlots during September totaled 2.21 million head, 6% above 2022. Net placements were 2.15 million head. During September, placements of cattle and calves weighing less than 600 pounds were 460,000 head, 600-699 pounds were 355,000 head, 700-799 pounds were 485,000 head, 800-899 pounds were 521,000 head, 900-999 pounds were 290,000 head, and 1,000 pounds and greater were 95,000 head.

Marketings of fed cattle during September totaled 1.66 million head, 11% below 2022.

Other disappearance totaled 57,000 head during September, 8% above 2022.

DTN ANALYSIS

"As expected over the last few days given the wide market shifts and variation in analyst cattle placement estimates, the biggest shift in the Oct. 1 USDA Cattle on Feed report was the cattle placements for the month of September," said DTN Contributing Analyst Rick Kment. "Cattle placements were well above not only the average pre-report estimate, but also above the high range of estimates, at 106% of 2022 levels. A total of 2.2 million head were placed in feedlots in September, creating additional concerns that the higher placement levels will further affect short-term price levels. September cattle placements are the highest monthly placements number since the November 2021 report.

"Cattle on feed totals were also bearish, based primarily on the increased placement levels and lower marketed numbers reported in the report. The total on-feed number of 101% is not in itself going to be a shock to the market, but the combination of factors will likely quickly tie to further market pressure early next week. The aggressive market pullback in both feeder cattle futures and live cattle futures over the last two trading sessions should curb long-term selling pressure. But given the entire weekend to marinate on the report, it is likely the market will take a bearish tone Monday morning.

"The number of marketed cattle was estimated to be significantly lower than year-ago levels, but with total marketings at 89% compared to the 90.4% in pre-report estimates, this will also limit short-term market support. Marketed cattle in September was the lowest level since the June 2020 report, creating concerns about the number of cattle needed to be sold and processed through the end of 2023."

	USDA Actual	Average Estimate	Range
On Feed Oct. 1	101%	99.7%	99.0-100.3%
Placed in September	106%	101.0%	95.9-104.8%
Marketed in September	89%	90.4%	89.5-91.5%