Written Commentary
CATTLE
News that US beef exports for August exceeded $1 billion in value for the first time ever helped to support. December cattle closed higher on the session as the early weakness yesterday failed to attract new selling interest. Traders are hopeful that beef prices turn up soon in order to help rationalize the premium of futures over the cash market. The USDA boxed beef cutout was down 13 cents at mid-session yesterday and closed $1.09 lower at $286.62. This was down from $297.33 the previous week and was the lowest the cutout had been since August 3. The technical action remains positive with the market trading near the weeks high. Brazil beef shipments to China reached a record high in September, but an export ban prompted by the discovery of two mad cow disease cases may soon curb trade.
Brazil is still awaiting China’s go-ahead to resume shipments after a month-long suspension. China is Brazil’s biggest market, taking more than half of the country’s exports of the red meat. Cash live cattle are firming up a bit as we move through the week. In Kansas on Wednesday 4,559 head traded at 123-124 with an average price of 123.69, up from 122.79 last week. In Nebraska 3,658 head traded at 122-124 with an average of 122.96 versus 122.14 last week. In Texas/Oklahoma 2,679 head traded at 123-124 with an average of 123.96 versus 123.86 last week. The USDA estimated cattle slaughter came in at 121,000 head yesterday. This brings the total for the week so far to 363,000 head, up from 352,000 last week and 355,000 a year ago.
LEAN HOGS
The market still looks vulnerable to a more significant pullback, but with the steep discount to the cash market, it will not take much in the way of positive cash news to experience a recovery bounce after the three day setback. The USDA pork cutout, released after the close yesterday, came in at $110.99, up $from $106.65 on Tuesday but down from $114.35 the previous week. Export demand news remains bearish and the market faces increased supply just ahead, but the basis may limit the selling short-term. The market closed lower on the session yesterday but well up from the lows. The early selling pushed the market down to the lowest level since September 27. The sharp break in the pork product market over the past few days, plus sluggish export news and ideas that the slaughter pace will pick up over the next six weeks are all seen as bearish forces. Weekly average weights for Iowa/Minnesota came in at 283.9 pounds, up from 283.5 pounds last week and up from 283.4 pounds last year. While weights seasonally move higher at this time of the year, weights are well up from the 5-year average which could suggest some back-up of supply in the country.
The CME Lean Hog Index as of October 4 was 94.11 up from 94.05 the previous session and 92.15 a week prior. This leaves December hogs trading at a $12.31 discount to the cash market as compared with the five-year average discount of $5.34. The USDA estimated hog slaughter came in at 478,000 head yesterday. This brings the total for the week so far to 1.418 million head, up from 1.413 million last week but down from 1.465 million a year ago. US monthly pork exports for August reached just 525.9 million pounds, down less than 1% from last year, and well off of the peak from March of 728.8 million pounds. Monthly exports represented just 23.7% of total production as compared with 33% in May 2021. Exports to China were only 57.6 million pounds this is down from near 160 million earlier this year and down from the record high 253.3 million pounds in May 2020. It is the lowest monthly export to China since mid-2019.
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