GENERAL COMMENTS:
Cattle futures were sharply lower Monday morning with most contracts holding losses of $3 per cwt or greater in both live cattle and feeder cattle trade. Friday's Cattle on Feed Report was more bearish than was expected and planned for with cattle placed during September increasing 6% from last year, well above analysts' expectations.
Even though traders took protection at the end of last week, given the numbers of cattle on feed and placed cattle in September, traders are trying to quickly adjust further expectations. This continues to be a very fluid and moving target, which could add further volatility over the next several days.
Hog futures were quiet Monday morning with traders keeping price in a narrow range on either side of unchanged, with most of the attention still focused on cattle markets. December corn is down 3 at $4.925 and December soybean meal is down $1 at $422.9. The Dow Jones Industrial Average is up 23.50 at 33,150.78.
LIVE CATTLE:
Sharp losses continue to develop through live cattle futures trade Monday morning. The bearish news from the Cattle on Feed Report, which posted cattle on feed numbers and placement numbers, were well over expected levels and September marketing of cattle was lower than expected, catching traders off guard, although a portion of pre-report protection already developed last week.
The bearish tone in the market continued to grow through the first couple of trade hours. What started out as a $2 to $3 per cwt loss at opening bell turned to $4 to %5 per cwt losses in some contracts. The downward pressure has so much emotion connected to the price swings at this point, it will be hard to determine where true market fundamentals will land once this emotional and technical market shift works through the complex.
Cash cattle markets are quiet Monday morning with show lists still being distributed throughout the morning. Trade last week actively developed on Thursday with most of the trade seen on Thursday. Southern live deals traded at $183 to $185.50 per cwt, which is $1 to $2 per cwt higher than the previous week. Northern dressed trade increased mostly $2 per cwt higher than the previous week at $294, although the range was $289 to $295.
Given the softness in futures trade, it is likely that early-week cash cattle market activity will be subdued. The Friday Afternoon Daily Direct Slaughter Cattle report lists week-to-date trade volume totals as KS 9,617; NE 22,910; TX 8,471; IA 32,303; CO not available due to confidentiality. October live cattle are $1.90 lower at $182.375 and December live cattle are $4.40 lower at $180.225. February live cattle are $5.00 lower at $182.725.
Boxed beef prices are higher: choice is down $0.42 ($304.96) and select up $3.84 ($282.54) with a movement of 45 loads (25.53 loads of choice, 5.43 loads of select, 3.58 loads of trim and 10.74 loads of ground beef).
FEEDER CATTLE:
Given the market pressure following Friday's Cattle on Feed report, it is not unexpected that feeder cattle contracts are showing significant losses Monday morning. Trade has held strong losses all morning, but at midday, prices were hovering from $3 to $4 per cwt lower in most contracts as trade weakness is seen through all late 2023 and most 2024 contracts.
The fact that losses in feeder cattle contracts are trailing the downward daily moves in live cattle trade is slightly surprising, but it is important to remember that feeder cattle contracts took the brunt of pre-report liquidation in front of the report release. It is hard to pinpoint given the last two Cattle on Feed Reports, the overall number of cattle that will move into feedlots for the year, but 2023 has turned out to be an early season of cattle placements.
This active move of cattle to feedyards during August and September is not totally shocking given the recent price levels and incentives that cattlemen have had to sell or deliver feeder cattle this year. Traders are likely to look for any sense of market stability throughout the entire cattle complex before actively stepping back into the market to buy.
October feeders are $1.48 lower at $240.35, November feeders are $3.43 lower at $238.8 and January feeders are $4.25 lower at $238.80.
LEAN HOGS:
Lean hog markets are the one ag commodity market that seems to be not in panic mode Monday morning. The lack of additional market direction, combined with the hemorrhaging of cattle futures seems to have created a sense of calm in all lean hog futures. At midday, prices are slightly higher, although during most of the morning, price levels have bounced higher and lower within a narrow trading range as traders seem to be adjusting positions with limited market interest. It is likely that lean hog trade will remain sluggish through most of the Monday session. December lean hogs are $0.43 higher at $66.425, February lean hogs are $0.05 higher at $70.475 and April lean hogs are $0.08 higher at $76.975.
Hog prices are higher on the Daily Direct Morning Hog Report, up $3.75 with a weighted average of $73.60, ranging from $66.50 to $74 on 1,855 head with a five-day rolling average of $73.08. Pork cutouts totaled 127.39 loads with 108.66 loads of pork cuts and 18.73 loads of trim. Pork cutout values are up $0.35 at $86.97.
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