Wednesday Morning Livestock Market Update - Price Support Remains Elusive

GENERAL COMMENTS:

Selling again dominated the livestock complex Tuesday. Live cattle showed weakness as light activity in the cash market showed cattle trading steady with last week and has likely set the tone for the week. Packers had some cattle purchased ahead and the concern over ongoing demand hangs over the market. Boxed beef prices remain lackluster with choice up $0.59 and select down $2.14. Slaughter pace continues to remain strong, but packers are finding little difficulty obtain supply to satisfy the need. Feeder cattle continued its weakness despite what corn price is doing. Technical selling has gripped the market and has not let go, moving futures down to the levels last seen in June. Thursday is the last trading day for September feeders.

The sell-off in hogs has been massive with the December contract losing around $12.00 in the last week. Yes, the concern over demand is very real, but falling prices continue to trigger stops, setting off further liquidation. The Commitment of Traders report last week showed funds being net buyers of 13,167 contracts, bringing their net-long positions to 64,664 contracts. This was the day before the meltdown. This added fuel to the fire as the recent longs saw it was the wrong move and liquidated. A sell-off of this magnitude has not been seen in quite some time. Traders will turn their attention to the Quarterly Hogs and Pigs report Thursday, which may result in short-covering. The National Direct Afternoon Hog report showed a surprising increase in cash of $5.49. However, cutouts ended the day down $2.45.

	BULL SIDE		BEAR SIDE
1)	Slaughter continues to run strong as packers are meeting steady demand. This should keep them buying at no less than steady cash.	1)	The concern over ongoing demand has put pressure on the market. The strong U.S. dollar may impact international demand, slowing exports.
2)	Feeder cattle are oversold and could find some short-covering soon after the large price decline.	2)	Feeder cattle still have more downside remaining to fulfill the head and shoulders technical projection.
3)	A chart gap in hog futures remains substantially above the current market, which may be filled at some point. Futures are oversold.	3)	The massive sell-off in hog futures may leave traders very cautious about re-entering the market on the long side until after the Hogs and Pigs report.
4)	Pork is well priced in grocery stores compared to other meat and poultry. This should increase demand.	4)	Packers for the most part may be done buying for the week and will offer lower money for purchasing hogs the rest of the week.

Tuesday Closing Livestock Market Update - Futures Continue Lower, Cash Cattle Trade Steady

GENERAL COMMENTS:

The live cattle, feeder cattle and lean hog contracts fell back as the likelihood of higher interest rates consumed the market and sent prices tumbling. The cash cattle market saw some cattle trade in the South for $143, which is steady with last week's business. Hog prices closed higher on the Daily Direct Afternoon Hog report, up $5.49 with a weighted average of $97.37 on 25,754 head. December corn is up 1 1/4 cents per bushel and December soybean meal is down $3.90. The Dow Jones Industrial Average is down 125.82 points.

LIVE CATTLE:

It was another brutal day for the live cattle complex as the market traipsed lower thanks to unwavering economic concerns. October live cattle closed $0.10 higher at $143.57, December live cattle closed $0.45 lower at $146.90 and February live cattle closed $0.60 lower at $150.85. Some feedlots have their commodities already bought and operating loans secured for the upcoming feeding months, but at some point, all will have to go back into their bank's office and sit down to discuss next year's loans and what that loan's interest rate will be, which is what's weighing heavily on cattlemen in all sectors of the business right now. The cash cattle market saw a light trade develop in parts of the South for $143, which is steady with last week's business. Some Southern feedlots are remaining firm in their $145 asking price, and still asking prices in the North are unknown. More business is expected to develop on Wednesday, but with packers having bought over 116,000 head least week, they may be less aggressive in this week's market. 

Tuesday's slaughter is estimated at 128,000 head, steady with a week ago and 9,000 head more than a year ago.

Boxed beef prices closed mixed: choice up $0.59 ($248.43) and select down $2.14 ($221.21) with a movement of 171 loads (81.64 loads of choice, 51.07 loads of select, 14.25 loads of trim and 24.42 loads of ground beef). The choice/select spread sits at $27.22.

WEDNESDAY'S CASH CATTLE CALL: Steady. With the immense technical sellout that the market is currently seeing, it's likely that packers try to keep prices steady.

FEEDER CATTLE:

The feeder cattle complex didn't stand a chance at rounding out the day higher by Tuesday's end, as the market faced pushback from the economy's frightened state, from the corn complex's mild gain before closing and from some pressure in the countryside as bawling calves are seeing hesitancy from buyers. October feeders closed $0.95 lower at $176.12, November feeders closed $0.77 lower at $176.27 and January feeders closed $0.92 lower at $176.80. At Blue Grass Stockyards in Lexington, Kentucky, compared to last week, feeder steers sold $2.00 to $5.00 lower with freshly bawling calves facing the deepest discounts. Many new crop, bawling, short-weaned calves hit the market and buyers unarguably showed preference for long-weaned calf packages. Feeder heifers sold $2.00 to $5.00 higher with some three-weights selling for as much as $10.00 higher. Slaughter cows traded steady to $1.00 lower and slaughter bulls sold steady. Feeder cattle supply over 600 pounds was 50%. The CME Feeder Cattle Index for Sept. 26: down $0.90, $177.82.

LEAN HOGS:

The lean hog complex endured yet another brutal trading day as the December contract fell to prices not seen since last December. October lean hogs closed $1.67 lower at $88.70, December lean hogs closed $3.15 lower at $76.25 and February lean hogs closed $3.30 lower at $80.35. The fundamental side of the market saw mixed reviews as pork cutout prices closed lower -- which could draw in more buying from dollar-savvy consumers -- but slaughter speeds and the cash market both saw excellent support. Given that the market has so much outside influence right now that's driving prices lower, the fact that Thursday will unveil another Quarterly Hogs and Pigs report hasn't gotten much attention from market participants. In trying to gauge the long-term trajectory of the market, Thursday's report will be key in seeing where current inventories. Pork cutouts totaled 374.88 loads with 328.30 loads of pork cuts and 46.57 loads of trim. Pork cutout values: down $2.45, $99.01. Tuesday's slaughter is estimated at 483,000 head, 2,000 head less than a week ago and but 12,000 head more than a year ago. The CME Lean Hog Index for Sept. 23: down $0.60, $96.99.

­­­­­WEDNESDAY'S CASH HOG CALL: Lower. Given that packers were aggressive in both Monday's and Tuesday's market, one would be led to believe that they're needs are mostly met and that they'll be less aggressive in the second half of the week. Then again, it's extremely unusual for packers to support the hog market on Mondays, which could mean that they're short bought and needing to buy up inventory.

Tuesday Midday Livestock Market Summary - Live Cattle, Hogs Lower After Cautiously Higher Start

GENERAL COMMENTS:

Tuesday's commodities are mixed, taking advantage of a temporary pause in the U.S. dollar. November feeder cattle are lower, pressured by Tuesday's higher corn price. December cattle and December hogs tried to start higher but are now extending Monday's new lows. December corn is trading up 6 cents and December soybean meal is up $2.70. The Dow Jones Industrial Average is trading down 157 points as the Fed promises more rate hikes ahead.

LIVE CATTLE:

December cattle are trading down $0.65 at $146.70 at midday Tuesday, leaning lower again after a cautious higher start. Outside market concerns continue to weigh heavy on commodity prices, including cattle with concerns that a slower economy will hurt beef demand at the retail counter. Last week's unweighted average for live steers came in at $145.09 Monday, up $1.45 from the previous week. The unweighted average for dressed steers was $228.90, up $2.04 from the previous week. 116,546 of negotiated volume last week was an encouraging indication of packer demand, but this market remains spooked by outside market concerns and is vulnerable to more noncommercial selling. Friday's CFTC data showed noncommercials holding 120,432 long contracts of live cattle as of September 20, 2022, the most since February. 

The overall slaughter pace so far in 2022 is running up 1.5% from a year ago and was steady at 667,000 last week. Dow Jones estimated Tuesday's cattle slaughter at 127,000, an active pace and the same as last week. Tuesday morning's choice boxed beef prices were up $1.07 at $248.91, while selects were down $1.27 at $222.08 with a total load count of 90. Choice boxed beef is near its lowest prices in a year and a half, curiously low for an economy in the midst of an inflation problem.

FEEDER CATTLE:

November feeder cattle are trading down $1.55 at $175.50, pressured again by concerns of slower economic growth ahead and by December corn trading 5 cents higher Tuesday morning. Technically, November feeder cattle broke below their 100-day average one week ago and prices have slid lower since as it's difficult to pencil out a positive return for feeders when the future of retail beef demand is not looking good. For the November contract, the May low near $171 may offer support, depending on how retail demand weathers the current storm. The CME Feeder Cattle Index ended at $178.71 Friday, tracking near the September price.

LEAN HOGS:

December lean hogs are trading down $2.95 at $76.45, extending Monday's new seven-month low. Tuesday morning's carcass value of $102.07 is 61 cents higher, but still near its lowest prices since January. The lower prices should actually serve pork well at the retail counter and help the slaughter pace stay active, even if the economy slows moving forward. Thursday afternoon's Hogs and Pigs report from USDA will get traders interest and offer some direction on where inventories currently stand. Private estimates are looking for Sept. 1 hog inventory to be down roughly 1.6% from a year ago, a generally supportive outlook for hog prices in an economy with difficult challenges ahead. Tuesday morning's Daily Direct Hog report showed the swine formula base down to $93.76. Negotiated hogs had no morning update and were last seen at $91.88 Monday afternoon. USDA expects pork production to increase 8.6% in the fourth quarter, but it is difficult to see how that will happen without increased inventory. Technically, Monday's new seven-month low was a bearish break in prices that should lead to more noncommercial selling. Friday's CFTC report showed noncommercials holding 89,178 contracts long as of Sept. 20, a big position to hang on to when prices are extending new lows.

Tuesday Morning Livestock Market Update - Rebound Likely, But May Be Limited

GENERAL COMMENTS:

The continued meltdown of the financial markets spilled over into commodities with prices lower across the board. A recession is looming, and traders were afraid of the impact on markets. Cattle spent some time in positive territory but retreated as pressure continued to build. Cash cattle did not trade as expected, but it may be difficult for feedlots to achieve higher cash this week due to the recent circumstances. The slightly negative Cattle on Feed report, along with the potential for lower demand as consumers grapple with higher prices, may increase the resolve of packers to hold or reduce bids. Boxed beef was mixed Monday with Choice down $0.79 and Select up $4.04. With stock futures higher overnight, cattle may see a bounce.

Hogs could not find any support Monday, even though cash was strong and cutouts were higher. The National Direct Afternoon Hog report showed cash up $5.54 with cutouts gaining $0.53. Liquidation erupted as pressure from the outside markets mounted. The weakness pushed futures quickly below support, which resulted in further liquidation. What has been technical support since May is now price resistance. There is fear over ongoing demand if inflation is not brought under control anytime soon. Traders are now in a quandary as the futures have fallen dramatically over the past four days and they look ahead to the quarterly Hogs & Pigs report Thursday.

	BULL SIDE		BEAR SIDE
1)	Even though cattle have been weaker, feedlots may not be ready to give up the fight for higher cash this week. Slaughter pace remains strong.	1)	Live cattle falling below support and feeder cattle making new lows for the move are not technically friendly to the market.
2)	Feeder cattle are oversold technically and ready for a bounce.	2)	Packers bought cattle ahead last week which may leave them less aggressive this week resulting in lower cash.
3)	Strong cash for hogs Monday showed packers needed to purchase supply for an increasing slaughter pace.	3)	Chart support now becomes resistance, making it difficult for hog futures to move back into the range they had been in all summer.
4)	Packer margins are improving, which may result in cash prices slowly beginning to trend higher.	4)	The upcoming Hogs & Pigs report may leave traders less aggressive about buying into the market until the numbers are known.