Monday Closing Livestock Market Update - Complex Lower as Widespread Selling Summaries Events

GENERAL COMMENTS:

The livestock complex couldn't avoid the market's looming pressure as investors become more and more fixated on the brutal combination of higher interest rates and hot inflation. The entire livestock complex closed lower and seemed to be focused on one thing -- the economy's weakened state. Hog prices closed higher on the Daily Direct Afternoon Hog Report, up $5.54 with a weighted average of $91.88 on 8,882 head. December corn is down 10 1/2 cents per bushel and December soybean meal is down $5.80. The Dow Jones Industrial Average is down 329.60 points.

LIVE CATTLE:

There are your normal "Mondays" and then there are Mondays like today. The live cattle complex wasn't able to pass by the market's overwhelming sellout as traders become increasingly worried about our economy. The live cattle futures dug a considerable hole as the spot December contract closed below the market's 100-day moving average -- which adds yet bearish coat to the market's mix. October live cattle closed $0.77 lower at $143.47, December live cattle closed $1.20 lower at $147.35 and February live cattle closed $1.25 lower at $151.45. The cash cattle market didn't see any interest develop in its market and given that packers bought aggressively last week, it's likely that they use this week's doggish attitude to hold prices steady and they could even try to work them $1.00 or $2.00 lower. New showlists appear to be mixed, somewhat higher in Nebraska/Colorado, but slightly lower in Texas, and lower in Kansas. Monday's slaughter is estimated at 125,000 head - 2,000 head less than a week ago and 6,00 head more than a year ago.

Last week's negotiated cash cattle trade totaled 116,546 head. Of which 66% (77,256 head) were purchased for the nearby delivery, while the remaining 34% (39,290 head) were purchased for the deferred delivery.

Boxed beef prices closed mixed: choice down $0.79 ($247.84) and select up $4.04 ($223.35) with a movement of 110 loads (60.70 loads of choice, 21.56 loads of select, 12.36 loads of trim and 15.23 loads of ground beef). The choice/select spread sits at $24.49.

TUESDAY'S CASH CATTLE CALL: Steady. Given that packers bought 116,000 head last week, it's likely that they give the cash cattle market the cold shoulder this week and use the market's lower tone to keep prices at least steady.

FEEDER CATTLE:

On the bright side, corn closed lower, but unfortunately so did all the other livestock contracts including feeder cattle. With the widespread selling across the commodity markets as fearful concerns about our economy become rooted in everyone's mind -- the feeder cattle complex didn't stand much of a chance at closing higher. September feeders closed $1.25 lower at $176.87, October feeders closed $1.27 lower at $177.07 and November feeders closed $1.20 lower at $177.05. At Oklahoma National Stockyards in Oklahoma City, Oklahoma compared to last week and at their midsession point, feeder steers traded steady and feeder heifers traded $3.00 to $6.00 lower. Steer calves were not well tested, and heifer calves traded $10.00 to $15.00 lower. Feeder cattle supply over 600 pounds was 45%. The CME feeder cattle index 9/23/2022: down $1.44, $178.71.

LEAN HOGS:

On a normal day, I'd be thrilled to see cash trading higher on a Monday in the hog complex alongside a stronger pork cutout close and an aggressive slaughter day all to start the week off. But given the state of the economy and the rightful fears of higher interest rates and inflation -- unfortunately those supportive factors of the market don't amount to much today. October lean hogs closed $2.25 lower at $90.37, December lean hogs closed $3.40 lower at $79.40 and February lean hogs closed $3.40 lower at $83.60. Bellied helped the pork cutout figure close higher as they jumped $5.16 higher compared to Friday's end but given that the rest of the market saw hit-and-miss demand, it wouldn't be surprising to see the rest of the week's reports mimic that back-and-forth tone. Pork cutouts totaled 347.77 loads with 289.69 loads of pork cuts and 58.08 loads of trim. Pork cutout values: up $0.53, $101.46. Monday's slaughter is estimated at 484,000 head -- 6,000 head more than a week ago and 10,000 head more than a year ago. The CME lean hog index 9/22/2022: $0.42, $97.59.

­­­­­TUESDAY'S CASH HOG CALL: Steady. It was interesting to see packers so aggressive in Monday's market while the futures complex had a mere meltdown. Given that packers chased cash hogs throughout Monday's trade it's likely an indication that they're somewhat short bought and could need to support the market again come Tuesday.

Monday Midday Livestock Market Summary - Outside Pressures Send Complex Lower

GENERAL COMMENTS:

At the day's opening bell, the cattle complex seemed as though it was going to trade strong; but as time passed, outside market concerns pushed contracts lower. The lean hog complex is in the same boat as its market is $1.00 to $2.00 lower and desperately needs to see strong domestic consumer support. December lean hogs are down $2.88 at $79.925, December corn is down 7 cents per bushel and December soybean meal is down $1.90. The Dow Jones Industrial Average is down 270.76 points.

LIVE CATTLE:

Live cattle futures are plunging lower as the market's strong show in the cash cattle sector isn't enough support to outweigh the pressures of the economy's uncertainty. October live cattle are down $0.75 at $143.50, December live cattle are down $1.25 at $147.30, and February live cattle are down $1.07 at $151.62. With boxed beef prices waning and packers now having to chase the cash market a little more aggressively -- monitoring slaughter speed is incredibly important. If boxes continue to work their way lower, packers may cut production in the form of slowing processing to preserve margin.

Last week, Southern live cattle traded for $143, which is $1.00 stronger than last week's weighted average, and Northern dressed cattle traded for mostly $228, which is also $1.00 stronger than last week's weighted average.

Boxed beef prices have not been updated by the USDA at this time.

FEEDER CATTLE:

Feeder cattle futures started the day off higher, but as the morning progressed lower tones sent the market tumbling lower. Friday's Cattle on Feed Report came out neutral as placements and on-feed totals were steady with a year ago, but marketings were 6% higher. Nevertheless, the market seems to be trading lower not because of Friday's report necessarily, but because of overbearing outside pressures (higher interest rates, higher inflation and overall economic uncertainty). October feeders are down $0.82 at $177.52, November feeders are down $0.57 at $177.67 and January feeders are down $0.92 at $178.55. Thankfully the corn complex isn't adding to the list of market pressures as it's trading 5 to 6 cents lower.

LEAN HOGS:

The lean hog complex is taking a wild ride in Monday's market and unfortunately the spot December contract is carving out a new low for the move, which is pressuring prices not last seen since February 2022. October lean hogs are down $1.97 at $90.65, December lean hogs are down $2.75 at $80.05, and February lean hogs are down $2.77 at $84.27. It's likely the market is concerned with China's third release of pork reserved last week and is skeptical of what this week's export report will unveil. Continuing to monitor pork cutout values will be one of the most important signals for the lean hog market as packers are going to need to see consumer support here domestically.

The projected CME Lean Hog Index for 9/23/2022 is down $0.60 at $96.99, and the actual index for 9/22/2022 is down $0.42 at $97.59. Hog prices are higher on the Daily Direct Morning Hog Report, up $4.24 with a weighted average of $90.45, ranging from $82.00 to $100.00 on 5,271 head and a five-day rolling average of $93.03. Pork cutouts total 198.67 loads with 166.28 loads of pork cuts and 32.38 loads of trim. Pork cutout values: up $0.64, $101.57.

The Cattle Contracts Library Pilot Program Moves Ahead

The USDA’s Agricultural Marketing Service published a Notice to Trade related to the Cattle Contracts Library Pilot Program. The National Cattlemen’s Beef Association says the Library is designed to be a tool for cattle producers, making information available that may allow them to capture unrealized value for their livestock. “We are pleased to see the pilot program progressing and note the important decision to use the Livestock Mandatory Reporting statutes as a basis for any subsequent rulemakings,” says NCBA Vice President of Government Affairs Ethan Lane. “We look forward to continuing to work with staff at AMS to ensure the success of this tool as well as the protection of our members’ proprietary business information.” The Consolidated Appropriations Act of 2022 directed the AMS to create a Cattle Contracts Library Pilot Program to increase market transparency for U.S. cattle producers. AMS is drafting a rule to ensure complete contractual information gets reported.

Monday Morning Livestock Market Update - Outside Markets Will Influence Trading Activity

GENERAL COMMENTS:

Cash cattle trading higher last week was not enough to overcome the concern of traders over the impact of the meltdown of the stock market last week on concerns of the potential of a recession and the impact that could have on demand. Boxed beef has been struggling and trending lower and the activity of the week in the financial sector did not make traders feel warm and fuzzy. Cash traded $1.00 high in both North and South, which should keep feedlots asking for more this week. Boxed beef closed mixed Friday with choice up $0.23 and select down $2.80. Another influence of trading on Friday was the Cattle on Feed report. True to form, the trade under guessed the placement number. Placements during the month of August were nearly 2.0% at 100% of a year ago. This was not as bad as it has been over the past reports, but it is slightly bearish. On feed was right on the average trade estimate at 100%. Marketings were at 106%, which is positive. Due to the marketing number being right at estimates, it is considered neutral. Bottom line is the report is slightly bearish, but the weakness of futures the second half of last week may already have that factored in.

Hogs could not catch a break Friday, suffering a third day of substantial losses. December through May contracts left a gap on the open as traders were quick to sell the market. The same financial concern that hit cattle was prevalent in hogs as the impact of a recession on demand is uncertain. Cash fell $7.69 on the National Direct Afternoon Hog report. Packers did not need to be aggressive to finish out the week and it certainly showed. Another concern was the $2.95 decline of cutouts. Slaughter pace remained stronger than last week and a year ago as hogs remain available to the market and packers need to continue to supply demand. Hog futures seem to be headed to retest the lows of the trading range.

	BULL SIDE		BEAR SIDE
1)	Marketing of cattle did well during August with an increase of 6.0% over a year. This strong pace may tighten cattle supply quickly.	1)	Placements were again higher than estimated on the Cattle of Feed report. More cattle will be available for a longer period than anticipated.
2)	The market may have over corrected to the downside ahead of the Cattle on Feed report with traders possibly wanting to buy the break.	2)	The head & shoulders formation in feeder cattle remains valid with substantially lower prices possible before the objective is met.
3)	Chart gaps from Friday remain above the December through May contracts in hog futures. These gaps generally are filled.	3)	Packers continue to work on improving margins and are able to purchase hogs at lower prices for increased slaughter without difficulty.
4)	The liquidation phase may have run its course during the second half of the week. A retest of support may bring buyers back into the market.	4)	China released more of their pork reserves to limit the rise of internal pork prices. This may reduce the amount purchased from the U.S.