DTN Livestock Midday: Buying Redevelops Across Cattle Futures

    ©Debra L Ferguson Stock Photography

    Cattle markets bounced higher Monday morning in reaction to reduced cattle placement and on-feed numbers in Friday’s report. Triple-digit gains are holding in live cattle and feeder cattle trade Monday morning as traders try to offset the extreme bearishness held by the complex over the last couple of weeks. Lean hog futures are mixed in limited activity Monday as the overall tone of the market remains weak.

    GENERAL COMMENTS:

    Triple-digit gains have flooded live cattle and feeder cattle futures as traders react to the bullish news seen in Friday’s cattle on feed report. With cattle placements in September falling below early analyst estimates and below the overall range of estimates, buyer support has ensued through morning trade.

    Live cattle futures are holding gains of $1 to $1.50 per cwt, while feeder cattle futures are $1 to $2.50 per cwt higher in most contract months.

    Although spill-over support is seen in December lean hog futures from positive cattle support, the overall hog complex remains unsettled as traders continue to search for demand support over the coming months.

    December corn is down 2 3/4 cents per bushel and December soybean meal is down $1.00 per ton. The Dow Jones Industrial Average is up 33 points with Nasdaq up 73 points.

    LIVE CATTLE

    Active gains aggressively swept through live cattle trade Monday morning as traders couldn’t wait to trade the bullish news from last Friday’s cattle on feed report. With lower total on-feed numbers and cattle placements from year ago levels, the focus on regaining market support was evident as prices moved $1 to $1.50 per cwt higher through morning trade.

    Although, at this point, the early week support is not enough to wipe out the bearish trend of the market. The focus on increased prices support may be enough to help stimulate commercial buying activity over the upcoming days. A move higher and stronger weekly close going into the end of October could be the sign traders have been looking for over the past two months.

    There remains only limited fundamental support in the cattle complex at this point, but sustained distance from last week’s lows could spark additional buyer support through the cattle complex. Cash cattle activity remains dead in the water Monday morning, although this is not unexpected or unusual for this early in the week.

    Showlist distribution and inventory taking continues to be the focus through all areas of cattle country Monday, and it is likely that more interest may not develop until midweek or later. Asking prices are not established, but given the stability in cash cattle prices over the last several weeks, it is not expected that significant shifts develop in initial asking prices or bids seen later in the week.

    Monday morning’s boxed beef prices are lower in moderate trade, with choice cuts $1.59 lower at $280.23 and selects down $0.92 at $262.19 on a total count of 77 loads. Dow Jones estimated Monday’s cattle slaughter at 120,000, steady with a week ago and 5,000 more than year-ago levels.

    FEEDER CATTLE

    Friday’s cattle on feed report lent some much-needed support to the cattle markets with cattle placements falling below pre-report estimates and the entire range of analyst projections. The focus last week seemed to dwell on the expectation of another bearish report, but the lack of this bearishness sparked triple-digit gains Monday morning.

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    Although feeder cattle futures have pullback back from initial morning gains, prices are still trading $1 to $2.50 per cwt higher in most contract months. October futures are having a hard time finding buyer support Monday morning as trade volume remains extremely light and there appears to not be enough momentum in the near-term contract to regain recent pressure.

    The focus on November and January futures, which have quickly offset Friday’s losses, could help to sustain follow-through buyer support across the complex. Although the lower placement numbers are bullish, this is still not enough change in market fundamentals or technical factors to abruptly change the overall tone of the market in the upcoming days.

    If current support can hold through the week, the potential to build on this momentum may help to set a recovery pattern for feeder cattle futures which tumbled over $13 per cwt over the past two months. The CME Feeder Cattle Index was priced at $155.11 for Oct. 21.

    LEAN HOGS

    Despite moderate price support trickling into spot December month lean hog contracts, the underlying tone of the market remains fragile at best. Last week, December lean hog futures fell $4.95 per cwt, with February contracts falling $4.70 per cwt. Front month futures have tumbled over $12 per cwt lower over the last month and continue to test long-term support set during early 2021.

    Even though significant price support developed in late September due to supply tightness, the growing concern through the pork complex is now resting on the uncertainty of sustaining and growing current pork demand. Demand support needs to be seen in both domestic and export markets through the next six months, which seems to be a concern to traders at this point.

    For the short term, trade is expected to remain mixed Monday with very little directional market shifts likely in the immediate future. This could easily keep prices holding in the current pattern through the rest of October. Wholesale pork prices firmed following aggressive gains in belly cuts, which rallied $23.35 per cwt Monday morning. This offset firm pressure in butt and picnic cuts.

    Cutouts are up $2.24 at $100.51 Monday morning on 157.76 loads. Negotiated hog prices are $0.59 lower at $63.64 per cwt on 4,842 head. The swine/pork market formula price is listed at $82.70 per cwt. Dow Jones estimated Monday’s hog slaughter at 476,000, 1,000 more than a week ago, while 10,000 less than year ago levels. The CME Lean Hog Index is listed at $83.70 per cwt for Oct. 21.

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