Monday, October 18, 2021  
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DTN Midday Livestock Comments          10/18 11:53

   Cattle Trade Softens in Early Week Activity

   Follow-through pressure in feeder cattle trade posted triple-digit losses in 
nearby feeder cattle futures Monday morning. Cattle markets are showing signs 
of a developing market correction following last week's support. Hog futures on 
the other hand have continued to build on previous buyer interest, although 
trade volume remains light.

By Rick Kment, Contributing Analyst


   Limited trade activity is seen in livestock futures Monday morning with firm 
pressure developing in live cattle and feeder cattle futures, while 
follow-through buyer support is seen in lean hog trade. There was very little 
news over the weekend that would spark widespread market direction in either 
cattle or hog trade, but traders continue to focus on overall economic market 
shifts and the global market positions, which have and will continue to impact 
meat exports. Trade is expected to remain mixed through most of the session 
Monday with traders starting to consider the end of week release of cattle on 
feed reports, while also focusing on daily shifts in beef and pork values 
heading into the last half of October. December corn is up 2 cents per bushel 
and December soybean meal is down $0.40 per ton. The Dow Jones Industrial 
Average is up 8 points with Nasdaq up 68 points.


   Live cattle futures have struggled to maintain buyer interest early Monday 
morning as prices have given back Friday's gains. This has pulled price levels 
away from six-week highs as traders continue to focus on pressure in feeder 
cattle trade and an early pullback in financial and stock markets. Although 
firm cash market support is developing, the lack of active fundamental support 
over the past couple of weeks is starting to create some underlying concerns by 
commercial traders that upward market potential could be limited through the 
rest of the year. These ideas are not fully founded at this point, but it does 
create some uncertainty about longer-term market direction. Cash cattle 
interest Monday morning remains typically quiet with both sides unwilling to 
step into the market at this point. Asking prices and bids are likely not to be 
fully developed until sometime Tuesday or Wednesday with trade likely to be 
pushed off until midweek or later. The recent trend of moderate Wednesday trade 
setting the tone for weekly prices seems to be the prevalent thought, but 
feeders are likely to become more focused on higher prices through the last 
half of October, which could allow many to hold out until later in the week. 
With the monthly cattle on feed report released this next Friday, it is 
possible that some trades will try to hold out cash business until after the 
report. The 5-area weekly average price last week increased $0.88 per cwt to 
$123.84. This is likely to help support additional support through the end of 
the week. Monday morning's boxed beef prices are mixed in light trade, with 
choice cuts $0.29 lower at $279.95 and selects up $0.83 at $261.45 on a total 
count of 47 loads. Dow Jones estimated Monday's cattle slaughter at 120,000, 
1,000 less than a week ago and 1,000 more than year ago levels.


   The combination of higher corn prices and follow-through pressure in live 
cattle trade has soured buyer support in all feeder cattle trade Monday 
morning. Although at this point, the downward market shifts are not indicating 
significant technical or fundamental changes in the overall cattle or feeder 
cattle market, morning losses have pulled buyers out of the equation. Nearby 
contracts are holding triple-digit losses, with October contracts leading the 
market lower with a $1.42 per cwt loss. The combined price pullback between 
Friday and Monday has pushed nearby contracts $2 per cwt lower, causing some to 
rethink just how much additional short-term support may develop in the complex. 
Although the cattle on feed report will not be seen until Friday, questions of 
overall placement levels are still in the back of traders' minds as many 
traders are still trying to sort out market gyrations which developed after 
last month's cattle on feed report. The CME Feeder Cattle Index was priced at 
$153.35 for Oct. 15.


   Limited follow-through buyer support has trickled back into the lean hog 
futures complex Monday morning Nearby contracts are holding 10 to 30 cent 
gains, as traders continue to push prices slowly but steadily away from recent 
lows last week. The ability to bring additional buyer interest to the market 
not only indicates that traders may have established firm support levels, but 
trade may become more focused on narrow to moderate price shifts, breaking away 
from the reactionary type of moves seen over the last month. Chinese customs 
data released Monday pegged September 2021 Pork imports at 210,000 mt, down 44% 
from the year earlier month. Year to date pork imports in September totaled 
3.14 million mt, down 4.3% from the year earlier period. This reduction of pork 
movement to China is confirmation of the lower export activity that has caused 
active pressure in most lean hog trade through early October. Cutouts are up 
$5.84 at $107.16 Monday morning on 156.30 loads. Negotiated hog prices are 
$0.96 lower at $67.33 per cwt on 6,171 head. The swine/pork market formula 
price is listed at $85.80 per cwt. Dow Jones estimated Monday's hog slaughter 
at 475,000, 3,000 less than a week ago, while 2,000 less than year ago levels. 
The CME Lean Hog Index is listed at $87.59 per cwt for Oct. 14.

   Rick Kment can be reached

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