GENERAL COMMENTS:
Livestock futures posted gains in all contract months through cattle and hog trade, but a late-day pullback was evident in most contracts. This caused most contracts to give up triple-digit gains seen at midday as buying support slowed through the end of the trading day.
Given prices posting strong gains at the end of last week, there seems to be some additional upward market moves still available. But given the current price levels, there is still growing concern around the ability for cash values to hold and meat prices to advance following the wild market losses over the last couple of weeks.
December and February live cattle and January feeder cattle futures closed with triple-digit gains, although it is important not to discount the rest of the complex which still posted firm upward support at the end of Monday's trading session. Hog prices closed higher on the Daily Direct Afternoon hog report, up $0.66 with a weighted average of $70.73 on 2,418 hogs. December corn closed down 2 1/2 at $4.783 and December soybean meal closed down $15.90 at $426.50. The Dow Jones Industrial Average is up 511.37 at 32,928.96.
LIVE CATTLE:
Live cattle futures posted the strongest gains early in the session with most contracts holding triple-digit gains through much of the morning. The ability to aggressively return to the market following the weekend seemed to have turned the page from the sharp losses seen early last week.
At the end of Monday's trading session, only December and February futures remained over $1 per cwt higher, with the rest of the complex moderating due to lack of renewed buyer support. It is important not to put too much stock in a late-day pullback, but there is concern that after a rally of nearly $4 per cwt, a light to moderate pullback could develop at the end of October. Cash cattle markets are quiet Monday with bids and asking prices not yet fully established. Showlists are mixed with increases in Nebraska/Colorado and Kansas and reduced in Texas. It is expected that when asking prices are seen, they will be higher than last week in all areas. The five-area weekly cash cattle average price moved to $184.02 per cwt last week. This is $2.13 per cwt lower than the previous week. Even though Southern trade last week developed late in the week, generally steady, the pressure in Northern trade eroded overall average price levels.
It is likely that active trade will be delayed until the last half of the week. October live cattle closed $0.13 higher at $184.125, December live cattle closed $1.03 higher at $183.25 and February live cattle closed $1.03 higher at $183.975.
Monday's slaughter is estimated at 125,000 head, steady with a week ago and 1,000 head less than a year ago.
Boxed beef prices closed higher: choice up $1.71 ($309.28) and select up $0.77 ($280.89) with a movement of 59.11 loads (25.92 loads of choice, 11.60 loads of select, 10.46 loads of trim and 11.13 loads of ground beef).
TUESDAY'S CATTLE CALL: Steady to $2 higher. Asking prices are undeveloped at this point, but it is expected that the focus on firmer markets will keep feeders from trading early in the week with anything besides moderate gains.
FEEDER CATTLE:
Feeder cattle futures continue to show moderate support during early week trade, but the overall concern of higher-than-expected cattle placement numbers through the fall has significantly limited trader confidence. Triple-digit gains seen in all nearby contracts during morning trade were quickly eroded, although prices still closed moderately higher in all contract months while January futures etched out a $1 per cwt gain at the closing bell.
The inability to keep pace with recent gains in live cattle contracts seems counterintuitive given the pullback in feed prices over the last couple of trading days. With weather conditions quickly turning toward winter through the northern half of the country, there may be limited movement of cattle in several areas.
November feeders closed $0.78 higher at $237.675, January feeders closed $1.18 higher at $236.875 and March feeders closed $0.80 higher at $239.375. The CME Feeder Cattle Index for October 26: down $3.20, $236.53.
LEAN HOGS:
Lean hog futures continue to steadily march higher as spot December contracts have now pushed $5 per cwt from contract lows seen in the last two weeks. The ability to continue to draw buyer support to the market is well-needed in the lean hog futures contracts, although there is still underlying concern about how much upward momentum the market will have before running headfirst into strong resistance.
The inability to see consistent gains in pork cutout values or cash hog prices over the last week has caused traders to become more hesitant. Although all contracts posted moderate to firm gains, the pullback from session highs seen early in the trading day is slightly disappointing.
December lean hogs closed $0.70 higher at $71.175, February lean hogs closed $0.88 higher at $74.375 and April lean hogs closed $0.75 higher at $79.675. Monday's hog slaughter is estimated at 487,000 head, 1,000 head more than a week ago and 0 head less than a year ago. Pork cutouts totaled 228.39 loads with 192.96 loads of pork cuts and 35.43 loads of trim. Pork cutout values are up $1.46 at $87.86. The CME Lean Hog Index for October 26: down $0.46, $77.95.
TUESDAY'S HOG CALL: Steady to $1 higher. Firmness in lean hog futures combined with early-week cash hog support is expected to improve early bids on Tuesday.
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