DTN Midday Livestock Comments 09/20 11:48
Sharp Stock Market Losses Pressure Livestock Trade
Aggressive triple-digit losses in stock markets Monday morning has impacted
all commodity markets. Firm losses are seen in cattle and hog futures with
concerns that additional non-commercial pressure may develop in the near
future. Limited volume is likely through the rest of the session, likely
keeping prices within current market ranges.
By Rick Kment, Contributing Analyst
Early pressure in stock prices have had a significant impact in all
commodity and livestock markets Monday morning. Traders' concern surrounding
the financial troubles of developer China Evergrande Group is not only focusing
on the specific company, but the overall outlook of the China property market.
Although the panic selling may not last long, the fear in both financial and
commodity markets is that this may just be the tip of the iceberg when it comes
to the direction of property values and economic direction in China. For now,
most livestock traders are taking limited protection, but still unwilling to
aggressively step in front of the bearish outside market news, allowing for
moderate losses in cattle and hog futures Monday morning. December corn is down
5 3/4 cents per bushel and December soybean meal is down $1.70 per ton. The Dow
Jones Industrial Average is down 636 points with Nasdaq falling 373 points.
Trade activity in live cattle futures has very little to do with market
fundamentals Monday morning. Traders' attention is squarely placed on the
triple-digit losses in the Dow Jones Index and Nasdaq, focusing on concerns of
more significant price pullback in the upcoming days. Live cattle futures are
holding losses of 5 to 55 cents per cwt at midday, with October futures leading
the complex lower. Even though prices have not shown overly aggressive price
pressure during the morning compared to other commodity markets, the potential
to keep prices under pressure through the entire Monday session is very likely.
Traders will continue to balance fundamental and technical market direction
over the next couple of days, looking for a buy opportunity within the complex.
Cash cattle markets are typical for a Monday morning with packers and feeders
still taking inventory and distributing showlists for the week. Following
steady to weak trade last week, it is likely that most activity will be delayed
until midweek or later. Bids and asking prices are not expected to be seen
until Tuesday or Wednesday, although the general softness in futures trade is
not expected to be helping the outlook for significantly higher cash cattle
trade in the near future. Showlists seen late Monday morning appear to be
mixed, lower in Texas, Nebraska and Colorado, while higher in Kansas. Friday
morning's boxed beef prices are higher in light trade, with choice cuts $1.2
higher at $315.67 and selects up $0.56 at $280.31 on a total count of 43 loads.
Dow Jones estimated Monday's cattle slaughter at 120,000, 7,000 higher than a
week ago and 3,000 more than year ago levels.
Feeder cattle futures have become the most stable of all livestock trade
Monday morning with midday market moves holding from 42 cents lower to 7 cents
higher. All but November contracts are trading in the red through morning
activity, but unlike the rest of the livestock market, the firm pullback in
grain trade is helped to limit market pressure due to lower cost of feed
associated with lower corn and soybean prices. Very limited activity is likely
to be seen through the rest of the session with traders' attention on outside
markets. The CME Feeder Cattle Index was priced at $154.60 for Sept. 16.
Firm pressure has been seen in all lean hog trade Monday morning as traders
have pulled back from last week's gains. Given that the widespread pressure in
outside markets has little to do with pork market fundamentals, price losses
are moderate at best compared to many of the financial markets. October futures
are holding a 37-cent loss, still trading above $85 per cwt, which may put
traders in a very good position to step back into the market. Pork cutout
prices surged higher following aggressive double-digit gains in ham cuts. Ham
prices increased $19.79 per cwt on the morning report with most other cuts
posting firm gains. Cutouts are up $2.06 at $107.47 Monday morning on 131.49
loads. Negotiated hog prices are $2.67 lower per cwt with a weighted average
price of $78.90 per cwt on 3,169 head on the National Direct Morning Hog
Report. The swine/pork market formula price is listed at $92.44 per cwt. Dow
Jones estimated Monday's hog slaughter at 475,000, 8,000 more than week ago,
while 3,000 less than year ago levels. The CME Lean Hog Index is estimated at
$94.26 for Sept. 16.
Rick Kment can be reached email@example.com
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