GENERAL COMMENTS:
Cattle futures led the complex lower Wednesday afternoon following another round of late day liquidation in both live cattle and feeder cattle trade. Early trade Wednesday morning remained stable within a narrowly mixed price range, but the combination of limited buyer interest and continued concern surrounding further pressure in beef values turned markets lower in the last two hours of trade. Mixed trade developed in lean hog futures as pressure in nearby contracts was traded for limited but evident support in early 2022 contract months. Hog prices moved higher on the National Direct Afternoon Hog Report in active trade, added $1.31 with a weighted average of $89.71 on 12,586 head. December corn is down 1/2 cent per bushel and December soybean meal is unchanged. The Dow Jones Industrial Average is down 81 points and NASDAQ is down 96 points.
LIVE CATTLE:
Live cattle futures turned lower in moderate midweek activity despite the pullback from mixed morning trade. Early activity Wednesday focused on short covering after strong market pressure seen Tuesday, but buy orders quickly dried up, leaving additional market gaps between current levels and supporting price levels. This allowed moderate to firm pressure to develop late in the day in all contracts, with prices falling $0.65 to $0.90 per cwt by the closing bell. Nearby live cattle futures have now moved below June lows, with the next significant resistance levels set at $121.05 per cwt in October contracts. A move below this level would not only break through technical support levels, but the move from contract highs to these lower price levels would signify increased weakness and further liquidation potential across the complex. October live cattle closed $0.65 lower at $123.10, December live cattle closed $0.90 lower at $128.65, and February live cattle closed $0.82 lower at $132.87. Cash cattle traded started to slowly trickle in Wednesday morning and continued through the afternoon with light to moderate trade reported in the South at $124 per cwt, while dressed trade is seen in the North at $203 per cwt. Reports of trade in western Nebraska are seen in at $126 per cwt midweek. Prices are generally steady to $1 per cwt higher in the South and $1 higher dressed basis in the North. The amount of trade seen Wednesday is a good start and may easily atone for further activity later in the week, although more cattle is likely to trade over the next two days. Asking prices on unsold cattle are remaining firm at $125 to $126 live basis in the South and $205 in the North. The Fed Cattle Exchange Auction today listed a total of 4,704 head, of which 1,765 actually sold, 303 were scratched from the auction and 2,636 head were listed as unsold, as they did not meet the reserve prices of $124. Opening prices ranged from $122 to $123, high bids ranged from $122 to $124. The state-by-state breakdown looks like this: Texas 4,175 total head, with 1,765 head sold at $123-$124, 2,107 head went unsold and 303 were scratched from the auction; Kansas 340 total head, all of which went unsold; Oklahoma 189 total head, all of which went unsold.
Wednesday's slaughter is estimated at 121,000 head, 2,000 more than a week ago and steady with a year ago. Week to date slaughter is estimated at 245,000 head, steady with year-ago holiday schedules, but 122,000 below week-ago totals. This is lower weekly slaughter levels are expected through the week, although larger Saturday runs will narrow that gap.
Boxed beef prices closed lower: choice down $0.33 ($334.86) and select down $3.73 ($298.17) with a movement of 132 loads (66.64 loads of choice, 27.73 loads of select, 16.55 loads of trim and 20.83 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Steady to $1 higher. Strength in early trade midweek is helping to solidify that packers need to actively source short and intermediate cattle in order to fuel current procurement levels. This is likely to create firm demand from cattle feeders over the next couple of weeks.
FEEDER CATTLE:
Feeder cattle futures once again lead the livestock market lower Wednesday. Initial trade posted mixed price shifts, as traders tried to cover short positions and bring some much-needed stability into the market. Nearby September and October contacts have not tumbled $11 per cwt since posting contract highs in August. The most aggressive market pressure developed in spring 2022 contract months, which continues to add concerns about the overall support in the market based on tighter overall feeder cattle and cattle supplies through the next year. This may start to indicate overall beef market apathy through the second and third quarters of 2022, but at this point there is not enough evidence and too many unknown factors to make fully informed decisions. September feeders closed $0.22 lower at $156.05, October feeders closed $0.77 lower at $159.27 and November feeders closed $1.45 lower at $161.42. The CME Feeder Cattle Index for Sept. 7: $157.47, up $0.10.
LEAN HOGS:
October lean hog futures carried the brunt of late day selling pressure across lean hog futures with spot month contracts falling 72 cents per cwt at the closing bell. Limited but very evident buying quickly developed Wednesday as traders slowly stepped back into the complex following early week pressure. With the current market shifts in all nearby contracts, lean hog futures remain well defined in the current market trend. The inability to break through technical resistance levels seems to be sparking renewed commercial and noncommercial interest. Price volatility in both pork cutouts and cash hog trade over the last couple of weeks has limited underlying fundamental support, but for now, traders are not willing to totally give up on the potential for a market bounce over the near future. October lean hogs closed $0.72 lower at $87.37, December lean hogs closed $0.22 lower at $80.55, and February lean hog futures closed $0.02 lower at $83.15. Pork prices surged higher following an aggressive $27.27 per cwt rally in ham cuts. Pork cutouts totaled 482.11 loads with 434.08 loads of pork cutouts and 48.03 loads of trim. Pork cutout values: up $4.73, $110.40. Tuesday's slaughter is estimated at 479,000 head, steady with a week ago and down 6,000 from a year ago. The CME Lean Hog Index for Sept. 7: down $0.56, $98.74.
THURSDAY'S CASH HOG CALL: Steady to $1 higher. Firm support in morning cash hog values Wednesday and the ability for lean hog futures to stabilize may bring about increased spending levels as packers try to gain access to additional market-ready hogs. Active procurement weeks following the holiday break will continue to keep plants at or near capacity in the near future.
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