DTN Midday Livestock Comments 09/23 11:39
Lean Hog Futures Lead Livestock Complex Higher
Moderate to active buyer support is noted in livestock futures Thursday
morning. Triple-digit gains are holding in most lean hog futures contracts as
prices have moved away from support price levels following early week pressure.
Cattle trade has continued to firm, although limited buyer support is seen at
By Rick Kment, Contributing Analyst
Active gains flooded lean hog futures trade Thursday morning with December
through July contracts up $2 to $3 per cwt at midday. Underlying pressure seen
early in the week has run its course, allowing for firm commercial buying to
redevelop near the end of the week. With the monthly Cattle on Feed report and
quarterly Hogs and Pigs reports both released Friday afternoon, the focus on
changing inventory levels and impact on supplies over the next year will
continue to be a key trading factor over the next couple of days. December corn
is up 2 3/4 cents per bushel and December soybean meal is down $0.80 per ton.
The Dow Jones Industrial Average is up 510 points with Nasdaq adding 127 points.
Live cattle futures trickle higher in limited morning trade Thursday. The
ability to sustain midweek price support is the major takeaway from morning
activity as uniform price gains are seen across the entire livestock complex.
October futures are showing limited gains of 2 cents per cwt at midday,
although the most active support of 40 to 50 cents per cwt is seen through the
second quarter of 2022 contracts. The focus on supply tightness into next year
is helping slowly draw traders back to the table, although market stability
seems to be the consensus of the entire complex. Beef in the weekly report
posted total export sales of 15,800 metric tons (mt) while shipments last week
of 18,200 mt were reported. Japan, South Korea and China were the top three
destinations for new sales and shipments for the week. Additional focus is also
expected to be put on Friday's Cattle on Feed report. This may not bring about
wide market shifts over the next two days but could cause moderate position
adjustments ahead of the report. Pre-report estimates are pointing to total on
feed numbers at 98.1% of year-ago levels. This estimate would put total on feed
numbers at 11.17 million head on Sept. 1. Typically cattle on feed levels post
yearly lows in September. The current estimate indicates seasonal lows may have
already been seen in the August report. Cash cattle markets remain quiet
Thursday morning following light to moderate trade which developed Wednesday.
Trade in the North on a dressed basis was seen from $193 to $198 per cwt with
most trade at $198 per cwt. This is generally $1 per cwt lower than last week's
weighted average. Live trade in the South developed at $123 to $124 per cwt,
which is steady with last week. The amount of trade reported Wednesday is
likely to have set the tone for the week and could be the bulk of needed trade
this week. But it is still likely a few additional sales will trickle into the
market over the next two days. At this point, it is not likely many are willing
to hold out until after Friday's Cattle on Feed report to trade cattle. Asking
prices on cattle still left on showlists remain at $200 in the North and $125
live basis in the South. Thursday morning's boxed beef prices are lower in
light trade, with choice cuts $0.43 lower at $307.40 and selects down $0.69 at
$274.81 on a total count of 52 loads. Dow Jones estimated Thursday's cattle
slaughter at 118,000 -- 3,000 less than a week ago and 4,000 less than year ago
Light buyer support is trickling back into feeder cattle markets Thursday
morning as widespread buyer support in nearly all outside markets and
aggressive gains in stock prices have stimulated buyer activity. Very little
new fundamental market direction is seen during morning trade, although it is
likely noncommercial traders are starting to retest the market following
several weeks of liquidation. Traders are also starting to focus on Friday's
Cattle on Feed report. Early estimates point to a 1% drop in placements during
August compared to 2020. But this estimate has the widest range between survey
recipients, which could bring additional volatility to the market. Given the
amount of early placements this year, it is quite possible placements could be
much lower than estimated, which could spark aggressive market gains early next
week. The CME Feeder Index was priced at $153.57 for Sept. 21.
Lean hog futures have finally broken out of the market slide which has
consumed the complex for the last week. This has created a buy opportunity in
all contracts with December through July futures holding gains above $2 per cwt
at midday. December lean hog futures are leading the complex higher with gains
near $3 per cwt, as traders focus on renewed underlying support from commercial
and noncommercial traders. Pork export sales last week were reported at 32,600
mt while shipments posted 36,100 mt. China new purchases were somewhat
disappointing with only 900 mt moving to the country. Mexico was the big buyer
last week with exactly half of all weekly export sales moving to Mexico.
Traders are also starting to focus on Friday's Quarterly Hogs and Pigs report.
Although this report typically isn't a huge market mover, it is important
because it helps to indicate both current supply situations and future supply
intentions of the industry. Cutouts are up $4.55 at $111.47 Thursday morning on
151.21 loads. Negotiated hog prices are reported at $76.72 per cwt on 3,475
head. Due to unreported morning cash prices Wednesday, price comparisons are
not available. Dow Jones estimated Thursday's hog slaughter at 476,000 -- 2,000
less than a week ago, while 7,000 more than year ago levels. The CME Lean Hog
Index is estimated at $91.89 for Sept. 22.
Rick Kment can be reached email@example.com
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