Written Commentary
MORNING LIVESTOCK FUTURES OUTLOOK
LIVE CATTLE
December live cattle rallied late in the session yesterday to close in the upper end of the range. Stock market weakness weakened prices early in the session yesterday, but the Dow rallied back and cattle prices did too. Since January of last year, beef prices are up 10%, while pork prices are mostly unchanged, and poultry prices have seen a 3% increase. This highlights the potential for the consumer switching to cheaper beef alternatives. December live cattle tested moving average resistance yesterday and if the rally can extend, next resistance is 179.50. Cutout prices are weakening, and a similar trend was seen last year at this time when cutout fell through the fall and into the end of the year. Cash trade was reported in KS Wednesday at 175-181 and a weighted average of 180.26. The 5-area, 5-day weighted average for the week is 181.03, compared to 181.27 at the end of last week. USDA will release beef production numbers in today’s USDA supply/demand report.
The USDA estimated cattle slaughter came in at 124,000 head Wednesday. This brings the total for the week so far to 362,000 head, up from 252,000 last week at this time but down from 376,618 a year ago. The USDA boxed beef cutout was down 22 cents at mid-session Wednesday and closed 87 cents lower at $307.36. This was down from $311.60 the previous week.
LEAN HOGS
Despite a significant jump in hog weights, December hogs closed near the highs of the day yesterday, supported by the cash hog premium to the futures. Open interest dropped for the last several sessions and may be an indication hogs may try and test the recent highs just above $74.00. Fundamental headwinds remain in place with strong pork production and heavy weights; however, the bullish technical picture seems to be driving prices currently. USDA will release pork production estimates in today’s USDA supply/demand report. Cash hog prices were mixed yesterday. The average hog weight for Iowa-Southern Minnesota as of September 7 was 284.0 pounds, up from 280.7 pounds the previous week and up from 279 a year ago. The 5-year average is 278.8 pounds. The CME Lean Hog Index as of September 9 was 85.56 down from 85.74 the previous session and from 86.15 the previous week. The USDA estimated hog slaughter came in at 483,000 head Wednesday. This brings the total for the week so far to 1.453 million head, up from 971,000 last week at this time and up from 1.424 million a year ago. The USDA pork cutout, released after the close Wednesday, came in at $91.24, down $3.07 from Tuesday and down from $94.12 the previous week.
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