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Livestock AM Market Outlook

CATTLE FUTURES

The cattle market remains in an uptrend but significant demand concerns emerged with the collapse in the stock market, and while the supply fundamentals slowly tighten into the fourth quarter, short-term supply may be enough to meet demand. In fact, slaughter for the last three weeks has been up 4.3% from last year, up 2.7% and up 3.9% from last year. Beef prices have pushed down to the lowest level since May 11 and this might weaken demand for live inventory short-term. The 4% collapse in the stock market after inflation readings helped to trigger some selling pressure. In addition, traders see cash cattle and beef prices steady/lower over the short run. Talk of the overbought condition with the market near the August and April highs was also seen as a negative force.

black and white pig up close

HOG FUTURES

October hogs closed sharply higher on the session and the buying is pushed the market up to the highest level since August 23rd. News of a sharp bounce in pork cutout values plus talk that the recent weakness in the cash market could spark improved packer margins were seen as positive forces. In addition, the market is having trouble finding rationalization for the much larger than normal discount of December hogs to the cash market. The CME Lean Hog Index as of September 9 was 98.29, down from 99.57 the previous session and 104.74 the previous week. December hogs are trading at a 15.12 discount to the cash market as compared with the five-year average discount of 4.30. If the market was following the five-year average basis, December hogs would be trading at 93.97, and not 85.65 into the close yesterday.

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.

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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.

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