Wednesday, September 30, 2020
Wednesday Morning Livestock Market Summary - Cattle Futures Search for Additional Late Month Support
Tuesday, September 29, 2020
|BULL SIDE||BEAR SIDE|
|2)||2)||Beef values slipped lower early in the week, creating some concern that further pressure may continue to develop during late September. Late-year holidays are not typically focused on beef demand, which could limit the ability to move additional product out of freezers during the upcoming weeks.|
Monday, September 28, 2020
|BULL SIDE||BEAR SIDE|
|3)||Strong underlying gains in all nearby lean hog futures quickly dashed fears of larger inventory, derailing the recent market rally. October futures surged above $71 per cwt, helping to focus on further long-term support developing during late 2021.||3)|
Friday, September 25, 2020
Rounding out another week, the livestock complex closed mixed as cattle contracts closed lower, but the lean hog complex rallied heading into the weekend. Hog prices closed higher on the National Direct Afternoon Hog Report, up $0.14 with a weighted average of $64.74 on 9,863 head. December lean hogs are up $1.15 at $64.425, December corn is up 1 3/4 cents per bushel and December soybean meal is up $2.10. The Dow Jones Industrial Average is up 358.52 points and NASDAQ is up 241.29 points.
From Friday to Friday livestock futures scored the following changes: October live cattle up $0.23, December live cattle down $0.45; October feeder cattle down $2.10, November feeder cattle down $2.38; October lean hogs up $5.25, December lean hogs up $0.90.
The live cattle complex fell lower as Friday progressed and headed into the weekend $0.07 to $1.05 lower. October live cattle closed $0.45 lower at $107.57, December live cattle closed $0.87 lower at $111.40 and February live cattle closed $105 lower at $114.60. As the day neared closing, worry about how much September's Cattle on Feed (COF) report would affect the marketplace grew. If looked at out of an analytical mindset, the report shouldn't wreck too much havoc. Yes, placements are sharply higher, but this isn't a surprise, as we witnessed historically low placements earlier this spring. However, it wouldn't be surprising to see next week's trade lower in the early part of the week as the COF report has a tendency of carrying into the next upcoming week.
Friday's cash cattle trade wasn't overly busy as the day served as a cleanup opportunity for both packers and feedlots. Following Thursday's robust cash cattle trade, Friday's trade followed suit, selling for $105 in the Southern Plains and for $165 mostly in the Northern Plains. Friday's slaughter is estimated at 112,000 head, 1,000 head more than a week ago and 2,000 head less than a year ago. Saturday's slaughter is projected to be around 57,000 head.
Boxed beef prices closed mixed: choice up $1.86 ($219.34) and select down $0.76 ($206.98) with a movement of 138 loads (83.11 loads of choice, 27.84 loads of select, 12.30 loads of trim and 14.60 loads of ground beef).
MONDAY'S CASH CATTLE CALL: Steady. Next week's cash cattle trade is going to be a tough sell for feedlots. Again, feedlots will be hopeful for steady trade, but as packers bought a sizeable volume of cattle this week, packers' desire to pay higher prices for cattle could be even less.
As Friday's afternoon progressed, the feeder cattle complex dove lower, closing anywhere from $0.97 to $2.20 lower. October feeders closed $1.95 lower at $140.32, November feeders closed $2.20 lower at $140.15 and January feeders closed $2.07 lower at $138.82. Worried about how Friday's COF report was going to sit with the market, and seeing weakness continuing to develop in the live cattle sector, bearish indicators pushed the feeder cattle complex lower. South Dakota's Weekly Cattle Auction Summary shared that, compared to a week ago, feeder steers under 850 pounds sold $2.00 to $5.00 higher, while steers over 850 pounds sold steady to $2.00 higher. Feeder heifers weighing under 850 pounds sold steady to $2.00 higher and heifers over 850 pounds sold unevenly steady. Demand remains very good for yearling steers and heifers as corn harvest has begun and cattle feeders are fully ready to take on incoming cattle. The yearlings are moving off grass and there is great competition for these cattle as their availability is becoming sparse. Spring born calves are starting to show up and farmer feeders are seeming interested in taking healthy calves home and feeding them out. The CME feeder cattle index for Sept. 24: down $0.36, $142.23.
As the cattle complex's support quivered in fear of the afternoon's COF report, the lean hog market jumped higher and took significant leaps in the nearby contracts. October lean hogs closed $2.27 higher at $71.75, December lean hogs closed $1.15 higher at $64.42 and February lean hogs closed $0.97 higher at $69.47. Following Thursday's hogs and pigs and export reports, the market seems unphased and willing to trade higher as both the cash market and futures market jumped higher before the weekend's close. Pork cutouts totaled 378.38 loads with 342.50 loads of pork cuts and 35.88 loads of trim. Pork cutout values: down $0.71, $91.32. Friday's slaughter is estimated at 478,000 head, 19,000 head more than a week ago and 4,000 head less than a year ago. Saturday's slaughter is projected to be around 230,000 head. The CME lean hog index for Sept. 23: up $0.81, $73.70.
MONDAY'S CASH HOG CALL: Steady to somewhat higher. The support for the lean hog market continues to grow and packers are obviously willing to pay higher prices to secure the fact that they'll be able to have more hogs when they need them.
The cattle complex is left trading lower as the market is hesitant about Friday's afternoon Cattle on Feed Report. Throughout the countryside a few more cash cattle bids have been renewed in parts of Kansas and Nebraska, but thus far they simply remain as bids. The lean hog market is seeing strong, positive trade throughout nearby contracts, and some modest gains throughout deferred contracts. December corn is up 3 3/4 cents per bushel and December soybean meal is up $2.50. The Dow Jones Industrial Average is up 44.25 points and NASDAQ is up 107.08 points.
The live cattle contracts are feeling some modest pressure from the board as contracts dipping $0.07 to $0.60 lower. The live cattle complex feels like it's left balancing two different signals as the week concludes. Following Thursday's strong cash advancement, the market should be robust and confident, but with weakness plaguing the board and a bearish COF report expected to round out Friday's business, the market braces cautiously. October live cattle are down $0.05 at $107.97, December live cattle are down $0.45 at $111.82 and February live cattle are down $0.65 at $115.00. Friday's cash cattle trade is still mostly quiet as bids of $105 are offered in Kansas, and bids of $104 to $106, as well as $164 to $165 are offered in Nebraska. Some more trade should develop before the day's end.
Boxed beef prices are mixed: choice up $1.74 ($219.22) and select down $0.37 ($207.37) with a movement of 67 loads (32.54 loads of choice, 17.48 loads of select, 10.56 loads of trim and 6.07 loads of ground beef).
Another day of looming pressure sends the feeder cattle contracts lower as the market searches for support while trying to secure position amid a $0.03 corn rally. October feeders are down $0.75 at $141.52, November feeders are down $0.75 at $141.60 and January feeders are down $0.75 at $140.20. Knowing that placements are expected to be significantly higher than a year ago on Friday's COF report, the feeder cattle market sits patiently, trending lower throughout Friday's morning trade.
Rebounding from Thursday's reports and the lack of trader interest, the lean hog complex is seeing substantial gains in nearby contracts and modest support through deferred contracts. October lean hogs are up $2.32 at $71.80, December lean hogs are up $1.42 at $64.70 and February lean hogs are up $1.10 at $69.60. The followed through support from the cash market and modest growth through the cutout value helped solidify the fact that the market was OK, and able to continue with advancing.
The projected two-day lean hog index for 9/24/2020 is up $0.83 at $74.53, and the actual index for 9/23/2020is up $0.81 at $73.70. Hog prices are higher on the National Direct Morning Hog Report, up $0.41 with a weighted average of $65.01, ranging from $60.00 to $65.01 on 8,193 head and a five-day rolling average of $63.26. Pork cutouts total 252.10 loads with 225.18 loads of pork cuts and 26.92 loads of trim. Pork cutout values: up $0.91, $92.94.
Following speculation about whether packers would show up and offer higher prices during the last full week of September and ahead of the Cattle on Feed report, light-to-moderate cash business developed Thursday afternoon. Although additional trade is expected to develop before the week is over, cash cattle trade posted $2 per cwt gains from last week's levels in most areas. Trade developed at $105 per cwt live in both the North and South, while dressed trade in the North was near $165 per cwt. The boost in cash values not only followed underlying support redeveloping in futures and boxed beef values during the week, but it helped to create underlying widespread market support, which may spark further futures market buying before the end of the week. Traders are now quickly changing gears from the recent gains and cash market support, to the upcoming Cattle on Feed report. Analyst expectations are that on feed numbers will increase 3.5% over year-ago levels, while placements are likely to see a 6% bounce from 2019 numbers. Marketings during the month of August are also expected to be over 3% lower than year-ago levels. The uncertainty in the afternoon report is not focused on if placement and on feed numbers will increase, but if early projections are in the ballpark of inventory gains. This could not only create significant pre-report positioning through most of the day Friday, but a bearish report would likely have a significant impact on trade early next week. Futures trade is expected mixed Friday morning with technical support developing Thursday, sparking expected follow-through support.
Early trade in lean hog futures is expected to be a balance between bearish market news from Thursday's Hogs and Pigs report and firming cash and pork values. The underlying support in cash hog prices through late September has been impressive with light-to-moderate gains becoming even more consistent as packers continue to increase prices paid for market-ready hogs in order to keep plants full. The surge higher in pork cutout values is also impressive, with prices gaining $3.06 per cwt based on expected further pork movement in domestic and export markets through the fourth quarter. Larger-than-expected hog inventory levels as of Sept. 1 is likely to create market pressure through the market with traders focusing mostly on the growth of heavy-weight hogs from year-ago levels. Although breeding inventory declined from year-ago levels, the limited reduction in hogs kept for breeding and farrowing intentions is likely to carry a generally bearish market tone well into 2020. The biggest question yet to be answered Friday morning is "just how much of this bearishness was factored into the market during the week". This could keep prices volatile during the Friday session. Cash hog prices are expected $1 lower to $2 higher with most bids expected steady to $1 higher. Slaughter Friday is expected at 481,000 head. Saturday runs are expected at 221,000 head.
|BULL SIDE||BEAR SIDE|
Cash cattle gains Thursday helped solidify the underlying fundamental support that has been developing in the complex. Cash cattle prices posted $2 per cwt gains from last week's levels as packers focus on expected tighter supplies over the coming weeks, combined with beef value stability.
Traders' attention will quickly move to the afternoon release of the Cattle on Feed report. Expectations of increased placements and higher cattle-on-feed numbers may curb any recent market optimism in futures trade.
Firm gains in nearby live cattle futures has broken through short-term resistance levels of $112 per cwt in December contracts. December futures are trading at one-month highs, setting the next market target at $114 per cwt during the month of August. Narrowing this price gap during Friday's trade would help spark further technical support through the complex.
|2)||Despite the firm gains in cash and futures trade at the end of the week, narrow gains in beef cutouts has not kept up with the rest of the market. This could limit further widespread market support if beef values do not significantly move higher in the near future.|
Strong gains in pork cutout values Thursday focused on the continued ability to actively move pork in all markets. This may overshadow report pressure seen at the end of the week based on expectations of further active pork movement well into October.
Growth of hog numbers in the 180 lb. and higher category signals continued bearish market news in the short term. This will put further pressure on the already-expected large supply of hogs ready for the market in the next month.
|4)||Farrowing intentions in Thursday's Hogs and Pigs report were most impacted in the September through November projection. This pullback of 5% from year-ago levels will further impact the availability of hogs during the middle of 2021. Putting increased price support to April through August lean hog futures.||4)||Despite hogs kept for breeding fell from year-ago levels, the reduction is not as great as most expected, or many feel will be necessary to keep lean hog futures trading in the current price range. This could have a bearish impact on 2021 price levels over the upcoming days and weeks.|