Written Commentary
CATTLE
The market is probing for a short-term low and it will not take much in the way of positive news for the beef market or the cash cattle market to spark at least a recovery bounce. December cattle closed sharply lower on the session yesterday and the selling push the market down to the lowest level since June 1. Continued weakness in the cash market and a sharp break in beef prices over the past couple of weeks helped to pressure the market. The USDA boxed beef cutout was down $1.22 at mid-session yesterday and closed $2.35 lower at $294.98. This was down from $305.60 the previous week and was the lowest the cutout had been since August 5. Cash live cattle are trading, on average, about $1 lower than last week. The 5-day, 5-area weighted average was 122.65 as of Thursday afternoon versus 123.63 a week ago.
US beef export sales for the week ending September 23 came in at 17,052 tonnes (2021 & 2022 combined). Cumulative sales for 2021 have reached 881,000 tonnes and the highest on record. The largest buyer this week was Japan at 5,500 tonnes, followed by South Korea at 5,282 and China at 2,762. South Korea has the most commitments for 2021 at 245,500 tonnes, followed by Japan at 226,200 and China at 136,100. The USDA estimated cattle slaughter came in at 121,000 head yesterday. This brings the total for the week so far to 473,000 head, down from 477,000 last week and 476,000 a year ago.
LEAN HOGS
December hogs gap higher on the opening yesterday and the buying push the market up to the highest level since July 27. Much better than expected export sales for the week led by active buying from China helped to support. Continued strong pork cutout values added to the positive tone. The USDA pork cutout, released after the close yesterday, came in at $115.24, up from $114.35 on Wednesday and $103.16 the previous week. This is the highest the cutout has been since August 27. The CME Lean Hog Index as of September 28 was 92.92 up from 92.15 the previous session and 92.65 the week prior. This leaves December hogs holding a $7.70 discount to the cash market as compared with a normal discount of $2.50. The turn up in open interest and the still wide basis are seen as positive forces. US pork export sales for the week ending September 23 came in at 42,637 tonnes (2020 & 2021 combined). Cumulative sales for 2021 have reached 1.545 million tonnes and the second highest on record. The five-year average is 1.195 million. The largest buyer this week was Mexico at 20,442 tonnes, followed by China at 13,960. Mexico has the most commitments so far for 2021 at 529,600 tonnes, followed by China at 376,000 and Japan at 180,500. China’s commitments are their second largest on record, but a year ago they were up at 642,900. The USDA estimated hog slaughter came in at 473,000 head yesterday. This brings the total for the week so far to 1.886 million head, up from 1.869 million last week but down from 1.932 million a year ago.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
