DTN Livestock Midday: Pressure Develops Across Markets

Livestock futures are seeing moderate to firm losses in nearly all contract months Wednesday morning. Continued downward pressure in lean hog futures is not unexpected, but cattle markets appear to be making abrupt adjustments to gains seen over the last week as larger-than-expected beef production levels are the focus, especially in early 2022 contract months.

GENERAL COMMENTS:

Firm losses are noted in livestock futures Wednesday morning with the most active pressure in deferred cattle contracts. Although hog futures continue to show light to moderate weakness, the complex is starting to indicate hog prices are at or near support levels.

Limited fundamental support in cattle markets seems to be creating a separation between nearby and deferred market direction, with 2022 contract months carrying the brunt of the pressure Wednesday.

December corn is down 12 1/2 cents per bushel and December soybean meal is down $0.10 per ton. The Dow Jones Industrial Average is down 118 points with Nasdaq up 63 points.

LIVE CATTLE:

Live cattle futures are picking up where they left off Tuesday afternoon as selling pressure moves back into the complex. The inability to show significant support in either cash cattle prices or beef values over the last week is starting to put questions in the minds of traders as to whether the early October market rally can be sustained.

December contracts have fallen $1.25 per cwt over the last three trading sessions, creating what could be viewed as a market top set last week. Traders appear to be etching out a maintainable and manageable trading range during the upcoming days. Although there is growing concern that additional longer-term pressure may further develop in deferred contracts.

This would impact second and third quarter 2022 prices. Cash cattle trade has started to trickle in with a few deals in Texas at $124 per cwt. This is generally steady with last week; although, at this point, there is not yet enough trade to fully establish a trend. There are also live bids of $124 in Kansas and bids in Nebraska at $196 dressed and $123 dressed.

This activity would be generally steady with last week. But feeders are still holding out for higher money. Asking prices remain at $125 to $126 live basis in the South and $198 dressed in the North. It is uncertain at this point if there will be enough active trade Wednesday to set the tone for prices for the week, or if more trade will be pushed off until Thursday or Friday.

The Fed Cattle Exchange Auction on Wednesday listed a total of 4,508 head, of which 272 actually sold; 192 head were scratched from the auction and 4,044 head were listed as unsold as they did not meet reserve prices of $122 to $122.50.

The state-by-state breakdown looks like this: Texas 1,357 total head; 272 head sold at $124 to $124.50; 1,085 head went unsold; none were scratched from the auction. Nebraska 718 total head, all of which went unsold. Kansas 2,308 total head; none sold; 2,240 head went unsold; 67 head were scratched from the auction. Oklahoma 125 total head, all of which went unsold.

Wednesday morning’s boxed beef prices are lower in moderate trade, with choice cuts $0.76 lower at $280.31 and selects down $2.03 at $259.32 on a total count of 101 loads. Dow Jones estimated Wednesday’s cattle slaughter at 121,000 — 1,000 less than a week ago and steady with year ago levels.

FEEDER CATTLE:

Feeder cattle futures have pulled back from Tuesday’s gains Wednesday. Continued active pressure in corn markets has shown very little kindness to the overall direction of feeder cattle trade as traders are starting to focus on the selling pressure in live cattle. The overall lack of support in all cattle markets is weighing most heavily on January through April feeder cattle contracts.

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This is eroding previous premium that had been established in early 2022 contract months. The overall focus on short-term supply levels and lack of underlying support in nearby live cattle trade is still keeping most feeder cattle traders cautious as they fear a correction is developing following the significant and aggressive market rally seen over the last week. The CME Feeder Index was priced at $154.15 for Oct. 11.

LEAN HOGS:

Early losses quickly redeveloped in all lean hog futures Wednesday morning as traders continued to shift prices lower following the aggressive triple-digit pressure over the last two sessions. Selling pressure quickly ran out of gas as the morning continued with limited but noticeable buying stepping into the December contracts.

Although December futures are only holding 7-cent gains at midday, the lack of pressure in the market is indicating traders are in the midst of potentially changing the overall direction of the complex. Traders are still trying to find an appropriate market balance as lean hog trade has been on a roller coaster ride since the USDA Hogs and Pigs report on Sept. 24.

Even though prices have retreated $6 to $8 per cwt from recent highs, the complex still remains $4 to $5 per cwt above market lows set during September. The focus on establishing firm demand support in the near future may help bring much needed stability back to the entire complex. Cutouts are up $7.26 at $109.64 Wednesday morning on 242.95 loads.

Negotiated hog prices are $0.20 lower at $68.13 per cwt on 5,819 head. The swine/pork market formula price is listed at $87.39 per cwt. Dow Jones estimated Wednesday’s hog slaughter at 477,000 — 1,000 less than a week ago and 14,000 less than year ago levels. The CME Lean Hog Index is listed at $89.73 per cwt for Oct. 12.

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