GENERAL COMMENTS:
Livestock futures traded Thursday in the same general direction they have for most of the week. Cattle contracts were under pressure, while hog futures are gaining additional momentum. Triple-digit losses developed in most cattle futures, while nearby hog futures were able to score additional triple-digit gains. Although there may be some end-of-month and end-of-quarter positioning taking place Thursday, the overall concerns are that hog supplies will be tighter in the next year and cattle numbers will continue to be larger than expected through the fall and winter. This is leading to some major adjustments to longer-term market expectations. Hog prices moved lower on the National Direct Afternoon Hog Report, falling $0.73 with a weighted average of $73.78 on 5,214 head. December corn is up 6 1/2 cents per bushel and December soybean meal is up $1.70 per ton. The Dow Jones Industrial Average is up 250 points and NASDAQ is up 47 points.
LIVE CATTLE:
Sharp, triple-digit losses developed in live cattle trade Thursday. Posting light to moderate losses most of the week, the live cattle market finally succumbed to the pressure in feeder cattle trade and concerns that additional fundamental weakness may have longer-term implications. October futures broke through support levels seen during the summer and closed at their lowest levels since early March. For the moment, long-term support at $120.42 is holding, but the market remains extremely fragile at this point and any sense of additional weakness could lead to further liquidation. Slightly stronger support appears to be holding in December contracts at $125 per cwt, but unless a major shift is seen in trade direction over the next couple of days, it may be hard to keep more noncommercial traders from exiting the market and moving into other markets. The fact that the most aggressive losses Thursday in live cattle futures were in late-month contracts (April through October 2022) gives even more indication that this latest move lower is not a short-term problem. October live cattle closed $1.20 lower at $120.57, December live cattle closed $1.32 lower at $125.72, and February live cattle closed $1.17 lower at $130.65. Cash cattle trade remains generally subdued Thursday afternoon following light to moderate trade which started Wednesday. A few additional deals have been done in the South at $124 per cwt. This is fully steady with midweek trade and generally steady with last week's weighted average price. Bids are seen in the North at $122 to $124 per cwt live basis, which is generally steady to firm with deals done Wednesday. A few dressed sales developed in Iowa at $196 per cwt, which is steady with both last week and trade earlier in the week. Asking prices on cattle left on showlists are at $124 to $125 live and $199 and higher dressed. The bearish moves in futures trade have had limited immediate impact on cash prices, but it does appear the tone for the week has been set, even though, given the number of reported sales, some additional trade will likely need to develop before the end of the week.
Thursday's slaughter is estimated at 121,000 head, 7,000 more than a week ago and 1,000 more than year ago totals.
Boxed beef prices closed lower: choice down $2.35 ($294.98) and select down $2.46 ($269.32) with a movement of 129 loads (76.38 loads of choice, 25.27 loads of select, 12.23 loads of trim and 14.80 loads of ground beef).
FRIDAY'S CASH CATTLE CALL: Steady. Given the light to moderate trade seen over the last two days, price levels are expected to have already been set, leaving the cash market generally steady with last week. Although additional clean-up trade may develop Friday, either side is not expected to deviate from current price levels at this point.
FEEDER CATTLE:
Sharp technical pressure flooded into feeder cattle futures Thursday as October through August contracts posted losses of $2 to $2.50 per cwt despite a midday pullback in corn prices. At midday, when grain prices reversed earlier gains, an attempt to bring additional buying into feeder cattle contracts developed, but this attempt was soon thwarted and allowed for even deeper losses by the end of the day. Nearby contracts have now broken through support levels seen in June, which could bring about increased follow-through pressure over the next couple of days. The full effect of larger-than-expected cattle numbers in last week's report has had lingering effects, which is unusual for the cattle market to be impacted this long by an inventory surprise. The challenge seen this time around is that not only cattle numbers are being adjusted, but the overall attitude and long-term expectations of beef supplies for most of 2022 are having to be rethought; that may lead to even more fundamental and technical volatility during the upcoming weeks. September feeders closed $0.35 lower at $153.92, October feeders closed $2.07 lower at $152.55 and November feeders closed $2.37 lower at $2.37. The CME Feeder Cattle Index for Sept. 29: $153.78, down $0.88.
LEAN HOGS:
Lean hog futures resumed the early week buying frenzy with December and February contracts posting triple-digit gains. Any effort Wednesday to back away from the bullish trend was dashed at the opening bell Thursday when buyers once again flooded the lean hog complex. There remains a combination of technical and fundamental buyer support moving into nearby and deferred contract months. However, for now, most of the support is centered around the December through April contracts. This time period is the most impacted by last week's change in inventory expectations, but overall pork demand during the first quarter of 2022 remains generally unknown. For now, traders are less concerned about being able to increase demand for pork, than the ability to find pork to meet this demand. Pork sales last week in the weekly export sales report increased sharply with 42,500 metric tons (mt) reported sold. Mexico once again led the leader board with 20,400 mt of pork, but the biggest shift in the report comes as China once again became a significant buyer after showing only limited support over the last few weeks. China posted purchases of 14,000 mt. Shipments were again moderate at best, with China taking 4,400 mt in previously purchased pork last week. Further focus will be placed on overall exports and especially China's involvement heading into the fourth quarter. October lean hogs closed $0.80 higher at $91.60, December lean hogs closed $1.80 higher at $85.40, and February lean hog futures closed $1.45 higher at $87.22. Pork prices were higher in all the primal cuts except butts and hams. The carcass value rose $1.18 on 280.59 loads of cuts and 31.99 loads of trim. Pork cutout values: up $1.18, $116.29. Thursday's slaughter is estimated at 473,000 head, 2,000 less than a week ago and down 12,000 from a year ago. The CME Lean Hog Index for Sept. 29: down $0.02, $92.90.
FRIDAY'S CASH HOG CALL: Steady to $1 higher. Underlying support in futures trade and pork values is expected to start having a positive impact on cash values in the near future. It is still uncertain if that support will be seen yet this week as packers struggle to maintain optimal processing levels, which could limit the need for aggressive late week buying efforts.
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