Written Commentary
CATTLE
The market is having trouble holding on to the stiff premium to the cash market in a period of weaker cash markets and declining beef prices. October cattle traded slightly higher on the session after an early break to the lowest level since September 13 before closing lower on the session yesterday. December cattle experienced the lowest close since May 4th. April cattle also had an outside trading day and closed lower on the day. Continued talk of high beef prices and the possible impact on demand helped to pressure the market early. Cash live cattle traded generally lower yesterday. Volume was heavy at 15,189 head, the highest since August 11. In Kansas 3,918 head traded at 121-124 with an average price of 122.93, down from 123.71 last week.
Beef prices remain historically high for this time of the year and have traded near $210 for each of the last two years during October. The USDA estimated cattle slaughter came in at 116,000 head yesterday. This brings the total for the week so far to 352,000 head, down from 363,000 last week and 356,000 a year ago.
LEAN HOGS
December hogs closed slightly higher on the session yesterday and the buying pushed the market up to the highest level since August 4th. The market is making a serious price adjustment following the USDA report which showed hog supply more than 2% below trade expectations. Exports have slowed, especially to China and traders will monitor the weekly sales report this morning. The average hog weight for Iowa-Southern Minnesota as of September 25 was 283.5 pounds, up from 281.9 pounds the previous week and 281.8 a year ago. Weights normally increase at this time of the year but current weights are well above last year and last year was well above the 5-year average. October hogs closed moderately lower on the session yesterday but with a small trading range and an inside day. Talk of the overbought condition and ideas that the short-term supply is enough to meet near term demand were seen as reasons to expect a pullback.
The USDA pork cutout, released after the close yesterday, came in at $114.35, up from $107.24 on Tuesday and $105.85 the previous week. This was the highest the cutout had been since August 27. The USDA estimated hog slaughter came in at 475,000 head yesterday. This brings the total for the week to 1.424 million head, up from 1.394 million last week but down from 1.447 million a year ago. China’s national average spot pig price as of September 30 was down 1.19% from the previous day. For the week prices are down 7.15%, down 23.11% for the month and down 69.96% year to date. Dalian live hog futures are down 17.36% for the month.
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