DTN Livestock Midday: Trade Pressured by Sharp Stock Market Losses

Texas A&M AgriLife Extension Service photo by Adam Russell

Aggressive triple-digit losses in stock markets Monday morning has impacted all commodity markets. Firm losses are seen in cattle and hog futures with concerns that additional non-commercial pressure may develop in the near future. Limited volume is likely through the rest of the session, likely keeping prices within current market ranges.

GENERAL COMMENTS

Early pressure in stock prices have had a significant impact in all commodity and livestock markets Monday morning. Traders’ concern surrounding the financial troubles of developer China Evergrande Group is not only focusing on the specific company, but the overall outlook of the China property market. Although the panic selling may not last long, the fear in both financial and commodity markets is that this may just be the tip of the iceberg when it comes to the direction of property values and economic direction in China.

For now, most livestock traders are taking limited protection, but still unwilling to aggressively step in front of the bearish outside market news, allowing for moderate losses in cattle and hog futures Monday morning.

December corn is down 5 3/4 cents per bushel and December soybean meal is down $1.70 per ton. The Dow Jones Industrial Average is down 636 points with Nasdaq falling 373 points.

LIVE CATTLE

Trade activity in live cattle futures has very little to do with market fundamentals Monday morning. Traders’ attention is squarely placed on the triple-digit losses in the Dow Jones Index and Nasdaq, focusing on concerns of more significant price pullback in the upcoming days. Live cattle futures are holding losses of 5 to 55 cents per cwt at midday, with October futures leading the complex lower.

Even though prices have not shown overly aggressive price pressure during the morning compared to other commodity markets, the potential to keep prices under pressure through the entire Monday session is very likely. Traders will continue to balance fundamental and technical market direction over the next couple of days, looking for a buy opportunity within the complex. Cash cattle markets are typical for a Monday morning with packers and feeders still taking inventory and distributing showlists for the week.

Following steady to weak trade last week, it is likely that most activity will be delayed until midweek or later. Bids and asking prices are not expected to be seen until Tuesday or Wednesday, although the general softness in futures trade is not expected to be helping the outlook for significantly higher cash cattle trade in the near future. Showlists seen late Monday morning appear to be mixed, lower in Texas, Nebraska and Colorado, while higher in Kansas.

Friday morning’s boxed beef prices are higher in light trade, with choice cuts $1.2 higher at $315.67 and selects up $0.56 at $280.31 on a total count of 43 loads. Dow Jones estimated Monday’s cattle slaughter at 120,000, 7,000 higher than a week ago and 3,000 more than year ago levels.

FEEDER CATTLE

Feeder cattle futures have become the most stable of all livestock trade Monday morning with midday market moves holding from 42 cents lower to 7 cents higher. All but November contracts are trading in the red through morning activity, but unlike the rest of the livestock market, the firm pullback in grain trade is helped to limit market pressure due to lower cost of feed associated with lower corn and soybean prices.

Very limited activity is likely to be seen through the rest of the session with traders’ attention on outside markets. The CME Feeder Cattle Index was priced at $154.60 for Sept. 16.

LEAN HOGS

Firm pressure has been seen in all lean hog trade Monday morning as traders have pulled back from last week’s gains. Given that the widespread pressure in outside markets has little to do with pork market fundamentals, price losses are moderate at best compared to many of the financial markets. October futures are holding a 37-cent loss, still trading above $85 per cwt, which may put traders in a very good position to step back into the market.

Pork cutout prices surged higher following aggressive double-digit gains in ham cuts. Ham prices increased $19.79 per cwt on the morning report with most other cuts posting firm gains. Cutouts are up $2.06 at $107.47 Monday morning on 131.49 loads. Negotiated hog prices are $2.67 lower per cwt with a weighted average price of $78.90 per cwt on 3,169 head on the National Direct Morning Hog Report.

The swine/pork market formula price is listed at $92.44 per cwt. Dow Jones estimated Monday’s hog slaughter at 475,000, 8,000 more than week ago, while 3,000 less than year ago levels. The CME Lean Hog Index is estimated at $94.26 for Sept. 16.

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