GENERAL COMMENTS:
Lean hog futures surged Thursday morning with most contracts remaining locked limit higher at the closing bell. The optimism surrounding actual sales to China in this week's USDA Export Sales report, as well as news reports and comments about China's interest in pork and soybeans, helped to spark buyer interest. Cattle futures struggled to find support most of the session, but the positive moves seen early in the week helped to fortify late-day buyer support. Cash cattle trade remains light Thursday afternoon with trade reported in Texas at $99 per cwt. This is generally $1 per cwt lower than last week's average, and may be enough to establish a weaker market tone for the week. A few delayed deals have been reported in Nebraska at $159 per cwt dressed basis. More trade is expected to develop in most areas before the end of the week with packers still needing to gain access to additional cattle before calling it good for the week. Asking prices remain firm around $100 per cwt live basis in the South and $165 dressed in the North. The National Daily Direct afternoon hog report was $1.25 lower ($44-$47.50, weighted average $46.05) on 11,441 head. Corn prices rallied following the USDA Crop Production and WASDE reports Thursday morning with December up 7 1/4 cents. Stock markets were higher in light trade with the Dow up 108 points and the NASDAQ up 47 points.
LIVE CATTLE:
Futures closed $0.27 to $1.32 higher. The live cattle market saw limited trade activity Thursday, which allowed mixed shifts in futures throughout the day. Buyers moved back into the complex in the last hour of trade following early position-taking and general market uncertainty. The December contract led the complex higher, up $1.32 per cwt to close at $104.95 -- a $5.78-per-cwt rally over the last three days. Although further support may be seen Friday, the contract will have to move through resistance near $106 per cwt in order to stimulate additional technical support. Late-week direction in cash cattle and beef cutout values will be closely monitored, as additional commercial and noncommercial traders remain waiting on the sidelines. Beef cutouts: higher, up $0.20 (select, $198.60) to up $0.08 (choice, $219.97) with moderate-to-good demand and moderate offerings, 122 loads (56 loads of choice cuts, 36 loads of select cuts, 8 loads of trimmings, 22 loads of coarse grinds).
FRIDAY'S CASH CATTLE CALL:
Steady to lower. Limited trade on Thursday puts early cash cattle trade at $1 per cwt lower in Texas. Although both sides are unwilling to settle for this trend at this point of the week, without a significant shift in futures or beef cutout values, it appears that cash markets will remain steady to lower.
FEEDER CATTLE:
Futures closed $0.30 to $0.77 higher. Feeder cattle futures shifted higher and lower throughout the session as early gains gave way to light-to-moderate pressure in live cattle trade and uncertainty about grain market direction. At the end of the day, moderate buyer support was able to camp in nearby feeder cattle futures as traders overlooked post-report gains in corn futures and followed the buyer interest in live cattle futures. Limited volume is expected Friday, which could allow for additional market direction. CME cash feeder index for 9/11 is unavailable at this time.
LEAN HOGS:
Futures closed $2.50 to $3 higher. Nearby lean hog futures opened limit higher, and deferred futures also moved limit higher through the morning. All contracts except for the tail-end February 2021 contract closed up the $3-per-cwt trading limit. That will trigger expanded trading limits Friday of $4.50 per cwt. With little to no trade at higher prices, it is unclear what buy orders still remain unfilled and what impact this will have early Friday. The explosion in lean hog futures was fueled by renewed talk of China buyers looking for pork ahead of and through next month's planned trade talks between the U.S. and China, as well as confirmation of 10,900 metric tons of pork sold to China in Thursday's export sales report. Although the optimism could spark long-term support, it is important to remember that prices have violently traded in both directions on positive and negative "talk" concerning potential trade agreements. Pork cutouts fell sharply following a nearly $10 tumble in belly cuts. Pork cutout values fell $1.98 per cwt, moving to $70.47 per cwt on 391 loads. CME cash lean index for 9/10 is $61.85, down $1.14. The DTN Projected Lean Index for 9/11 is $60.69, down $1.16.
FRIDAY'S CASH HOG CALL:
Steady to $2 lower. Despite the aggressive moves in futures trade, cash markets are not expected to deviate from current market trends with bids expected steady to $2 per cwt lower. Most bids are expected $1 per cwt lower. Friday slaughter numbers are expected at 476,000 head. Estimated runs Saturday are at 192,000 head.
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