GENERAL COMMENTS:
Growing concern about an overall economic slowdown is pressuring livestock futures Friday morning. Feeder cattle and lean hog futures have posted triple-digit losses with limited volume. Live cattle futures are the only complex with mixed price direction at midmorning, as spot October futures hold limited support as other contracts erode slightly due to softness in outside markets. A combination of overall economic downturns and increased COVID cases has kept most buyers cautious to say the least. Traders are looking for increased outside market direction over the weekend and are likely to become more active early next week. Early morning trade is also focused on the morning WASDE report, which was released at 11 am CDT. The September WASDE report posted moderate losses in annualized beef and pork production from last month's estimate, but these shifts have not made significant impact in futures prices following the report release. December corn is down 2 cents per bushel and December soybean meal is up $2.50 per ton. The Dow Jones Industrial Average is down 140 points.
LIVE CATTLE:
Live cattle futures are mixed Friday morning, although an underlying weak tone continues across the entire complex. Spot October live cattle futures are gaining limited support from the firmness in cash cattle trade, helping to support 10 to 30 cent gains Friday morning. The rest of the market remains under light to moderate pressure, with most significant losses seen in summer and fall 2022 contract months. The triple-digit losses in feeder cattle futures and softness in corn trade are curbing long-term expectations for live cattle prices and beef values during the majority of 2022. Even though cattle supplies are expected to remain tight over the upcoming year, the biggest question is if current beef demand can be sustained in domestic and export markets over the next 6 to 12 months. Weekly beef export sales remained moderate with a total of 12,400 metric tons (mt) sold the last week of August. This is a 3,200 mt decrease from the previous week and may continue to add to the underlying softness in cattle and beef prices. Japan was the largest purchaser of beef last week, which is not surprising, at 4,600 mt. Rounding out the top three sales destinations were China and South Korea. Export shipments totaled 18,800 mt with the largest shipment destination Japan. Cash cattle markets remain quiet through the morning Friday following generally light trade in most areas the last two days. It is likely the bulk of business may have already been put into the books for the week, although limited clean-up activity would not be out of the question. Asking prices on remaining cattle are at $124 to $125 live basis in the South and $204 and higher in the North. Trade through the week started Wednesday, generally steady to higher with last week's weighted average prices. But as the week continued, prices started to soften following the combined pressure in futures and beef values. It will be very interesting to see where the weekly weighted averages fall once data is released early next week. The general expectation is prices will remain steady to firm from the previous week once all the dust settles. The growing uncertainty in wholesale beef cuts as they come down from pre-holiday surges and futures market weakness may continue to limit short-term support in cash values in the near future.
Friday morning's boxed beef prices are lower in moderate trade, with choice cuts $3.13 lower at $329.45 and selects down $0.92 at $295.53 on a total count of 74 loads. Dow Jones estimated Friday's cattle slaughter at 118,000 -- 2,000 higher than a week ago and 1,000 less than year ago levels. Saturday runs are expected at 96,000 head.
FEEDER CATTLE:
Feeder cattle futures can't seem to get a break over the last couple of weeks with triple-digit losses flooding back into nearby contracts as traders try to reach the weekend in order to get some much needed breathing room. The glimmer of hope that prices may have found market stability early Thursday morning was dashed with late-day pressure Thursday and continued market liquidation as traders entered the Friday session. September through November futures are holding losses of $1.30 to $1.75 per cwt during late-morning as traders focus on eroding beef values and softness in live cattle trade. Even a small to moderate pullback in corn prices was unable to lend any support to the feeder cattle futures, which have posted $12 to $13 per cwt losses in nearby contracts over the past three weeks. Given the strong move higher in July and August, prices are still well above summer lows, which is actually limiting noncommercial traders from quickly moving back into the market at this point. The CME Feeder Index was priced at $156.83 for Sept. 8.
LEAN HOGS
Triple-digit losses quickly developed in lean hog futures as a generally bearish trade session in most commodity and financial markets developed Friday. December lean hog futures are leading the complex lower with $1.67 per cwt losses, moving below $78 per cwt, while October and February futures are holding losses from $1.40 to $1.50 per cwt during late morning. At this point, current losses have not broken through summer support levels, but weekly chart prices are testing the 40-day moving average. A weekly close at current levels could add further bearishness to the entire lean hog and pork complex. Pressure is also developing in the lightly traded December and February pork cutout futures, creating concerns of further market pressure in pork values at the end of 2021 and through the first quarter of 2022. Trade volume is expected to remain generally quiet through the rest of the session, although outside market shifts will likely play a more significant role in hog price moves through the month of September despite firm fall pork demand support which is expected. Pork export sales were reported at 33,800 mt last week. This is 300 mt above the previous week and has moved to the highest level since late July. China actively stepped into the market during the last week of August accounted for nearly half of the weekly export totals at 15,000 mt. Mexico and South Korea rounded out the top three sales destinations with the overall total sales to these three countries accounting for nearly 80% of all export pork sales for the week. Shipments totaled 29,100 mt through the week. Cutouts are up $0.64 at $109.34 Friday morning on 187.55 loads. Negotiated hog prices are $0.38 lower per cwt with a weighted average price of $85.57 per cwt on 4,385 head on the National Direct Morning Hog Report. The swine/pork market formula price is listed at $96.00 per cwt. Dow Jones estimated Friday's hog slaughter at 475,000 -- 12,000 higher than a week ago and while 5,000 less than year ago levels. Saturday's slaughter is expected to reach 369,000 head as packers try to make up for holiday closures this past Monday. The CME Lean Hog Index is estimated at $97.96 for Sept. 8.
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