GENERAL COMMENTS:
Although the broader economy is on tenterhooks, awaiting an interest rate change this week, the livestock complex is trading mildly Tuesday: live cattle staying near seven-year highs, feeder cattle sagging in response to higher feed costs, and lean hog contracts mixed and finding a new neutral trading range. December corn is up 12 cents per bushel and December soybean meal is up $11.60. The Dow Jones Industrial Average is down 340 points.
LIVE CATTLE:
Live cattle futures have been higher through Tuesday morning's trade, alongside nervous inflation trade throughout the commodity sector. October live cattle are up $0.425 at $146.15, December live cattle are up $0.70 at $151.60, and February live cattle are up $0.35 at $155.60. Consumer spending on higher-dollar grocery items, like restaurant meals and certain cuts of beef, will be one of the first things threatened if the Federal Reserve can't convincingly tame inflation without triggering a recession. But for now, the beef market and the fed cattle market are about as hot as ever, with nearby live cattle futures higher now than they've been since late 2015. In anticipation of Friday's Cattle-on-Feed report, the Dow Jones is showing the average analysts' pre-report estimate exactly even with last year's Sept. 1 on-feed numbers. If boxed beef prices can maintain some strength, that will strengthen feedlots' negotiating position for cash trade later this week. New showlists for the week are mixed -- somewhat higher in Texas, but lower in Kansas, Colorado and Nebraska. Last week Southern live cattle traded for $142, which was $1.00 higher than the previous week's weighted average, and Northern dressed cattle traded for $226 to $227, which was steady to $1.00 higher than the previous week's weighted average.
Boxed beef prices are mixed: choice down $0.61 ($251.84) and select up $1.82 ($227.71) with a movement of 83 loads (38.89 loads of choice, 21.21 loads of select, 0 loads of trim and 22.4 loads of ground beef).
FEEDER CATTLE:
With the corn market jumping up by double digits Tuesday morning, it's almost a foregone conclusion that feeder cattle futures will sink in response. September feeders are down $0.875 at $179.075, October feeders are down $1.45 at $180.85, and November feeders are down $1.725 at $181.80. At these prices, and with December corn above $6.90, feedlots need to see live cattle prices six months out reach at least $155 per cwt, and fortunately, that's what the April contract is showing -- barely. A few spring calves are showing up at the sale barns in mostly small packages this week, but supply is still light, and the market continues to wait for the big fall runs to demonstrate just how robust demand will be.
LEAN HOGS:
The hog market seems to have finally found the Goldilocks price level somewhere between August's high and early September's over-reactive low, and on Tuesday the futures contracts are mixed: October lean hogs are down $0.175 at $96.30, December lean hogs are up $0.375 at $88.525, and February lean hogs are up $0.425 at $92.35. Treasuries and the bond market are experiencing a sharp sell-off Tuesday amid the expectation for a higher target interest rate from the Federal Reserve, to be announced Wednesday, and every financial asset with any connection to the economy is subject to volatility in this environment, including lean hog futures and options. But for actual hogs and actual pork, actual demand is still the driver, and packers are showing themselves to be eager Tuesday in terms of both volume and prices paid for hogs. Packing plants have been ramping up their hog slaughter pace in recent weeks and Tuesday's slaughter is estimated to be another big day: 481,000 head, which is even with last week and 18,000 more than a year ago at this time.
The projected CME Lean Hog Index for 9/19/2022 is down $0.06 at $98.36, and the actual index for 9/16/2022 was up $0.45 at $98.42. Hog prices are popping on the Daily Direct Morning Hog Report, up $4.31 with a weighted average of $94.26, ranging from $84.00 to $100.00 on 7,891 head and a five-day rolling average of $94.18. Pork cutouts total 195.92 loads with 180.91 loads of pork cuts and 15.01 loads of trim. Pork cutout values: up $0.57, $106.45.
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