Written Commentary
MORNING LIVESTOCK FUTURES OUTLOOK
LIVE CATTLE
December live cattle pulled back slightly yesterday after the strong rally Monday. Monday’s exceptional strength is still unexplained, and fundamentals suggest consumer beef consumption remains at risk and traffic at higher-end steak restaurants remains lighter than normal. December live cattle are expected to have significant headwinds in the 179.00 area. Cash cattle trade was light again yesterday with 405 head traded at $182 in the north. The 5-area 5-day weighted average for the week is unchanged from yesterday at 181.05, but down from the end of last week at 181.27. Cash ideas for the rest of the week are steady/weaker. Carcass weights continue to be a problem, and last week’s weights were a record and 32 pounds above the same week last year. The USDA estimated cattle slaughter came in at 124,000 head Tuesday. This brings the total for the week so far to 238,000 head, up from 127,000 last week at this time but down from 249,225 a year ago. The USDA boxed beef cutout was up $1.06 at mid-session Tuesday and closed 29 cents lower at $308.23. This was down from $310.67 the previous week.
LEAN HOGS
December hogs tried to rally early in the session yesterday but closed back just above unchanged, breaking the streak of 4 consecutive lower closes. The major question for the hog market is whether demand is really shifting from beef to cheaper pork and chicken and if so, is the current pullback a buying opportunity. Pork export demand has been strong over the last month, but we think prices may pull back further, potentially to 50% retracement support at 68.80. The CME Lean Hog Index as of September 6 was 85.74 down from 86.24 the previous session and from 86.47 the previous week. The USDA estimated hog slaughter came in at 484,000 head Tuesday. This brings the total for the week so far to 970,000 head, up from 486,000 last week at this time and up from 946,986 a year ago. The USDA pork cutout, released after the close Tuesday, came in at $94.31, down 95 cents from Monday and down from $98.12 the previous week.
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