DTN Midday Livestock Comments 09/30 11:37

DTN Midday Livestock Comments 09/30 11:37 Cattle Futures Tumble on Fundamental Pressure Live cattle and feeder cattle futures took a significant hit Thursday morning. This continues to break through support levels, potentially adding further liquidation at the end of the month. Hog futures, on the other hand, continue to expand early week gains. By Rick Kment, Contributing Analyst GENERAL COMMENTS: Growing weakness is seen in cattle futures Thursday morning. Although the last day of the month and third quarter is bringing about some additional position-taking, the focus on growing market weakness heading into the last three months of the year is evident from a fundamental and technical perspective. The move lower Thursday morning has broken through support levels in nearby contracts with October futures falling below $121 per cwt and moving to six-month lows. The overall lack of cash market support -- which typically starts to develop during September -- is creating concern that longer-term gains may not follow traditional seasonal patterns through the rest of the year. Hog futures continue to remain energized from expectations that hog supplies will be tight over the next year, creating triple-digit gains early Thursday morning. December corn is down 5 1/2 cents per bushel following the crop report and December soybean meal is down $6.90 per ton following aggressive pressure in soybean futures. The Dow Jones Industrial Average is down 433 points with Nasdaq down 43 points. LIVE CATTLE: Active pressure moved into live cattle futures Thursday. The previous pressure in feeder cattle markets and continued softness in beef values earlier in the week have taken a toll on live cattle futures with nearby contracts testing and breaking through short-term support levels. Early Thursday, trade broke through $121 per cwt in spot October contracts and $126 per cwt in December contracts. Although an attempt to move off session lows at midday is helping regain limited buyer interest, these lows represent a six-month low in spot month price levels. Concerns about sluggish export sales heading into the fourth quarter of the year and uncertainty as to inventory levels seen in last week's Cattle on Feed report are keeping traders generally bearish the entire cattle complex at this point. Beef sales and shipments in the latest weekly export sales report remained lackluster once again with a total of 16,100 metric tons (mt) of beef sold, while 18,500 mt of beef was shipped. Although weekly sales are still well above August lows, the lack of late-year growth continues to add further concern to the entire beef market. Cash cattle activity Thursday morning remains generally quiet, but the cash market tone for the week may have already been set due to light to moderate trade in most areas Wednesday. Live cash cattle trade in the South developed at $124 per cwt, which is mostly steady with last week's weighted average. Dressed trade in the North was also reported steady with last week at $196 per cwt. The hope is feeders can hold out for higher prices to establish steady to firm cash markets for the week. But given the bearishness of futures trade, and steady decline in beef values for the week, it is not looking promising that anything better than steady will be seen once all needed cash cattle trade is in the books. Asking prices are around $124 to $125 in the South and $199 and higher in the North. Thursday morning's boxed beef prices are lower in light trade, with choice cuts $1.22 lower at $296.11 and selects down $0.47 at $271.31 on a total count of 51 loads. Dow Jones estimated Thursday's cattle slaughter at 121,000 -- 3,000 more than a week ago and 1,000 more than year ago levels. FEEDER CATTLE: Sharp early losses in nearby feeder cattle futures set a significantly weaker tone for the entire cattle complex Thursday. Limited volume during the first couple hours of trade added to the market uncertainty. Although buyers are attempting to slowly move back into the market at midday, the concern that additional liquidation will develop before the end of the session is keeping most buyers well away from the complex. September futures are very lightly traded with most of the market activity moving to the October and November contract months. October contracts have broken through June lows during morning trade, which has been a significant support level the market has been closely watching over the last few weeks. October feeder cattle futures have now fallen over $17 per cwt from contract highs set during the third week of August. Technically speaking, the next major support level is May lows at $147 per cwt, creating growing uncertainty of buyer support over the near future. The CME Feeder Index was priced at $154.66 for Sept. 28. LEAN HOGS: Renewed buyer support quickly and aggressively moved back into all lean hog futures trade with nearby contracts posting additional triple-digit gains Thursday morning. With prices shifting lower Wednesday, buyers seem to once again be comfortable with the current market balance as tighter supplies may continue to be a major issue for the lean hog complex through the first half of 2022. Even though daily slaughter rates are starting to shift lower from year ago levels on a regular basis, the tighter supplies of hogs in the country make lower procurement levels less of a price issue and could help tighten overall pork supplies over the upcoming weeks and months. The strong export sales numbers posted in the morning report are adding to the overall futures gains. Pork sales last week in the weekly export sales report increased sharply with 42,500 mt reported sold. Mexico once again led the leader board with 20,400 mt of pork, but the biggest shift in the report comes as China once again became a significant buyer after showing only limited support over the last few weeks. China posted purchases of 14,000 mt. Shipments were again moderate at best, with China taking 4,400 mt in previously purchased pork last week. Further focus will be placed on overall exports and especially China's involvement heading into the fourth quarter. Firm gains once again developed as belly cuts surged higher by $14.49 per cwt. Cutouts are up $3.25 at $118.36 Thursday morning on 162.07 loads. Negotiated hog prices are $0.34 lower at $73.61 per cwt on 3,445 head. The swine/pork market formula price is listed at $93.68 per cwt. Dow Jones estimated Thursday's hog slaughter at 476,000, steady with a week ago, while 8,000 less than year ago levels. The CME Lean Hog Index is estimated at $92.92 for Sept. 28. Rick Kment can be reached kmentrick@gmail.com (c) Copyright 2021 DTN, LLC. All rights reserved.