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DTN Midday Livestock Comments          09/15 11:48

   Cattle Markets Struggle to Hold Previous Gains

   Firm underlying pressure has redeveloped Wednesday morning in all cattle 
trade. The inability to sustain Tuesday's active market rally is creating 
concerns that the gain Tuesday may not represent a directional shift in prices.

By Rick Kment, Contributing Analyst


   Hopes that aggressive triple-digit gains in live cattle and feeder cattle 
Tuesday would change the direction of the market are being dashed Wednesday 
morning. Moderate to active losses are seen across the cattle market, creating 
concern that the bounce higher may be nothing more than positioning by traders 
who are viewing the market as still bearish. Triple-digit losses in feeder 
cattle futures remain the most concerning at this point, as this has the 
potential to draw additional underlying weakness into the market despite 
tighter feeder cattle numbers expected moving into feedlots over the upcoming 
months. Hog futures are still moving in the opposite direction of cattle trade. 
Helping to bring limited to moderate support into most lean hog futures 
Wednesday morning. December corn is up 11 cents per bushel and December soybean 
meal is down $2.20 per ton. The Dow Jones Industrial Average is up 114 points.


   Live cattle futures remain lightly traded Wednesday morning with limited 
buyer support trying to step into the market but is being overshadowed by 
continued selling pressure. The one-day market rally seen Tuesday was not 
enough to actively change the overall direction of the market. But with 
December through April contracts posting $2.50 to $2.80 per cwt gains Tuesday, 
this may very well reestablish support levels in all nearby contracts. Concern 
surrounding the potential movement and direction of beef product through the 
next couple of months will continue to be a major point for all commercial and 
noncommercial traders. Given strong underlying support in energy and grain 
markets Wednesday morning, some traders seem to have temporarily moved their 
attention away from the live cattle complex, as they look to adjust positions 
in these other commodity markets. Without significant direction through the end 
of the session, nearby live cattle futures are expected to hover in the current 
price ranges, with light to moderate losses at closing bell very likely. But it 
is still important to note that the majority of Tuesday's gains remain intact 
and could help to rekindle buyer support at the end of the week. Cash cattle 
trade is starting to slowly develop Wednesday morning with light live cattle 
trade through the South seen over the last couple of hours. Trade in Kansas and 
Texas is seen at $123 to $124 per cwt, generally steady to $1 per cwt lower 
than last week's price levels. It is uncertain at this point if this will be 
enough trade to set the tone for the week, but the potential for steady to weak 
price levels is starting to take hold. Limited dressed trade in Nebraska is 
reported at $200 per cwt. This is $1 per cwt lower than last week's average and 
could be the target price points for cattle sold the rest of the week. Asking 
prices on unsold cattle are holding at $125 and higher live basis in the South 
and $202 and higher dressed. Fed Cattle Exchange Auction results are delayed 
due to technical difficulties, with prices unavailable for midday livestock 
comments. If data is released later this afternoon, prices will be listed in 
the closing comments and also in the DTN Cattle Prices and Trends page. 
Wednesday morning's boxed beef prices are lower in active trade, with choice 
cuts $2.38 lower at $320.51 and selects down $3.64 at $286.98 on a total count 
of 127 loads. Dow Jones estimated Wednesday's cattle slaughter at 120,000, 
1,000 less than a week ago and 1,000 less than year ago levels.


   Feeder cattle prices have resumed the downward market trend Wednesday as the 
optimism the previous session was unable to garner significant follow-through 
support. Although traders tried to hold gains early in the session, the overall 
lack of buyer interest in nearby and deferred feeder cattle contracts allowed 
for firm losses to develop at midday. October through January futures are 
holding triple-digit losses. Although the entirety of Tuesday's gains has not 
eroded, the inability to change the market direction for more than one session 
will be viewed as generally bearish for the market. Continued caution 
surrounding beef values and long-term support in the live cattle market is 
offsetting tighter long term cattle supply levels. This could continue to add 
moderate weakness to feeder cattle in the near future, although Monday's lows 
may be used as long-term support levels, helping to bring much needed stability 
to feeder cattle prices. The CME Feeder Cattle Index was priced at $154.39 for 
Sept. 13.


   Lean hog futures bounced back Wednesday morning from sharp early week 
losses. Spot October contracts remain the bright spot of the complex with 
prices surging $1.55 per cwt, moving near $82 per cwt at midday. The rest of 
the complex is much less optimistic of aggressive price shifts with prices 
hovering from 10 to 25 cent gains through early summer 2022. Traders remain 
concerned about overall industry growth through the end of the year and first 
quarter of 2022. With demand expected to remain steady to firm, the question 
about how to move the excess pork will continue to put the brakes on active 
buyer support. December lean hog futures are currently trading at a $9.50 per 
cwt discount to the spot October contracts. This is not only expected to impact 
interest from futures traders but will also likely have a significant impact to 
both cash hog and pork values through the end of the year. Pork cutout prices 
held limited gains despite a strong pullback in rib cuts Wednesday morning. 
Wide price volatility in most primal cuts could lead to uneven price shifts in 
the near future. Cutouts are up $0.41 at $105.61 Wednesday morning on 202.86 
loads. Negotiated hog prices are $0.59 lower per cwt with a weighted average 
price of $83.52 per cwt on 6,755 head on the National Direct Morning Hog 
Report. The swine/pork market formula price is listed at $92.40 per cwt. Dow 
Jones estimated Wednesday's hog slaughter at 477,000, 3,000 less than week ago, 
while 7,000 less than year ago levels. The CME Lean Hog Index is estimated at 
$95.35 for Sept. 14.

   Rick Kment can be reached kmentrick@gmail.com

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