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DTN Midday Livestock Comments          09/21 11:55

   Cattle Markets Stabilize Tuesday

   Following a wild outside market tumble Monday, traders seem to be slowly 
backing away from the "panic button" Tuesday and trying to reassess fundamental 
and technical market factors in cattle and hog futures. Mixed trade in cattle 
futures is helping create much-needed price stability, while lean hog futures 
continue to erode based on demand uncertainty.

By Rick Kment, Contributing Analyst


   Strong follow-through pressure is developing in lean hog futures trade with 
December contracts leading the complex lower with a $1.30 per cwt loss. Growing 
uncertainty about economic strength in China is impacting the pork and hog 
markets more directly than other livestock markets. Cattle futures are mixed to 
mostly higher in light trade volume. The pressure in corn over the last two 
days, combined with active buyer interest in stock markets, is helping to draw 
buyers back into the live and feeder cattle complex. December corn is down 5 
cents per bushel and December soybean meal is up $2.10 per ton. The Dow Jones 
Industrial Average is up 144 points with Nasdaq adding 98 points.


   Given all the uncertainty and fireworks seen early Monday, live cattle 
futures seem to have shrugged off most of the outside market volatility and 
have traded in a narrowly mixed price range Tuesday. Prices continue to hover 
between 10 cents lower and 22 cents higher with very limited volume. The lack 
of direction in cash trade and no significant news in beef demand changes 
through early September seems to have brought temporary market stability to the 
complex. Nearby live cattle futures remain just above support levels set last 
week. The ability to hold these price points through the end of the month would 
likely spark increased interest and draw renewed noncommercial trade back into 
the complex. Traditionally, seasonal lows are set through the middle of 
September, helping create incentive for traders to look for firming demand and 
higher prices in 4th quarter trade. Cash cattle trade still remains undeveloped 
with feeders and packers showing very little interest at this time. Asking 
prices are likely to be seen near $124 and higher in the South and $202 and 
higher dressed in the North; active bids may not start to surface until midweek 
or later. With the Cattle on Feed report being released Friday afternoon, there 
is a small chance some trade may hold out until after the report, although the 
movement of futures trade and interest by packers over the next two days will 
be the main focus of cash cattle trade. Tuesday morning's boxed beef prices are 
lower in moderate trade, with choice cuts $0.56 lower at $315.10 and selects 
down $1.09 at $279.66 on a total count of 96 loads. Dow Jones estimated 
Tuesday's cattle slaughter at 120,000 -- 3,000 higher than a week ago and 2,000 
less than year ago levels.


   Feeder cattle futures appear to be "treading water" Tuesday morning with 
limited direction. Although some market support is seen from the firmness in 
outside markets, there remains concern surrounding the ability to entice 
noncommercial traders back into the complex. Early losses in corn prices led to 
initial price moves across the feeder cattle complex Tuesday morning. But the 
depth of buyer support remains limited, allowing for nearby contracts to slip 
slightly lower, now holding 7- to 17-cent losses in remaining 2021 contract 
months. Very little direction is likely to be seen across the feeder cattle 
complex over the next couple of hours, likely leaving prices mixed in a narrow 
range at closing bell. The CME Feeder Index was priced at $153.75 for Sept. 17.


   Continued pressure is seen in lean hog futures trade Tuesday morning despite 
renewed optimism in stock markets as traders unravel a portion of the pressure 
seen Monday. Concern that longer-term weakness in pork demand and the entire 
hog market will not be as quickly offset as other markets is creating 
follow-through pressure in all contracts. December futures are leading the 
market lower with a $1.30 per cwt loss, sparking additional concerns that last 
week's market lows may be tested once again in the near future. The rest of the 
complex is hovering between 60 and 90 cents per cwt lower with increased 
underlying pressure developing across the entire complex. Given that the main 
concern of Monday's losses focused on how China would react to economic 
pressure, pork demand and exports to China continue to be uncertain if further 
economic pressure is seen in China. Cutouts are up $4.03 at $106.92 Tuesday 
morning on 262.45 loads. Negotiated hog prices are unreported at this time due 
to packer submission issues. Dow Jones estimated Tuesday's hog slaughter at 
463,000 -- 12,000 less than week ago, while 23,000 less than year ago levels. 
The CME Lean Hog Index is estimated at $93.57 for Sept. 20.

   Rick Kment can be reached kmentrick@gmail.com

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