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DTN Midday Livestock Comments          09/28 11:51

   Traders Try to Find Stability Following Monday's Wild Ride

   Limited but firm buying has returned to most lean hog futures Tuesday 
morning following limit-up gains Monday. Cattle futures are mixed with 
short-covering gains in feeder futures offsetting further pressure in live 

By Rick Kment, Contributing Analyst


   Feeder cattle futures are the only livestock market moving in the opposite 
price direction from Monday's trade. Feeder cattle traders are focusing on the 
fact that emotional trade Monday may have overstated downward market pressure, 
while also adjusting price levels to lower corn markets Tuesday. Hog futures 
remain generally bullish; gains are firm, but nowhere as aggressive as seen 
Monday. The potential to build underlying stability across the entire livestock 
market in the next couple of days could help bring additional -- but needed -- 
buyer support back to the table heading into the month of October. December 
corn is down 4 1/2 cents per bushel and December soybean meal is down $0.80 per 
ton. The Dow Jones Industrial Average is down 438 points with Nasdaq down 390 


   Narrow losses have developed Tuesday as the live cattle complex has 
seemingly been immune to the post-report market volatility seen in all other 
livestock trade. Nearby contracts are posting uniform losses of 5 to 22 cents 
per cwt with December contracts showing the most activity -- and also the most 
price pressure of the complex. The lack of market movement Monday and Tuesday 
seems to indicate traders have already adjusted to increased cattle inventory 
levels in the last six weeks. The aggressive market pressure in nearby 
contracts based on uncertainty of long-term demand and exiting of noncommercial 
traders, points to market prices at or near support levels. Cash cattle markets 
are quiet Tuesday morning, which is not unusual at all. Bids are still 
undeveloped in all areas, but it would not be surprising if a few starter bids 
appear before the end of the day. Asking prices on live Southern cattle are 
around $125 per cwt but asking prices in the North are still unavailable. It is 
likely most trade will be pushed off until Wednesday or later, the price 
volatility in most markets will likely add some uncertainty to cash markets 
over the next couple of weeks. But packers are still expected to be in the 
market for moderate amounts of cattle moving into early October. Tuesday 
morning's boxed beef prices are mixed in light trade, with choice cuts $0.33 
lower at $302.37 and selects up $1.63 at $276.01 on a total count of 81 loads. 
Dow Jones estimated Tuesday's cattle slaughter at 121,000 -- 1,000 more than a 
week ago and 3,000 more than year ago levels.


   Buyers have slowly but steadily stepped back into the feeder cattle complex 
Tuesday as bearish report news seems to have slightly overstated market 
pressure early in the week. October and November contracts are holding $1 per 
cwt gains, but price pressure may still hold given recent increases in feeder 
cattle placements. It is important to remember the reports deal with historical 
data. In this situation, placement levels are as of Sept. 1, nearly a month 
ago. It is important to keep things in perspective and understand that 
placements in August were higher than nearly anyone thought, but current market 
situations also point to steady demand for feeder cattle as more cattle are 
sold into feedyards due to the seasonal cycle. It will be interesting to 
compare Sept. 1 data with Oct. 1 data and determine if this trend of increased 
placements continues through the entire season. A firm pullback in corn prices 
Tuesday is also helping add to firm but limited buyer support in nearby feeder 
cattle trade, as traders try to lock in margins before they place cattle in 
feedyards. The CME Feeder Index was priced at $153.98 for Sept. 24.


   Light to moderate buyer support is trickling back into the lean hog complex 
Tuesday morning following limit gains Monday. Traders are still trying to sort 
out exactly what the short- and long-term implications are to the much tighter 
inventory situation revealed in the Hogs and Pigs report. The report is 
quarterly, compared to most other ag and livestock reports which are monthly, 
so it gives a much less clear picture of how the hog industry is adjusting to 
market conditions. But given the uncertainty surrounding demand from China for 
U.S. pork in the coming year, significant further upside market potential could 
be temporarily limited. Wide market swings in wholesale pork prices on a daily 
basis are also adding to the confusion, creating less clarity between market 
volatility and the demand-driven direction of the market. Spot October 
contracts are holding narrow gains, while other nearby contracts are trading 50 
to 90 cents higher at midday. Cutouts are up $1.63 at $113.58 Tuesday morning 
on 190.97 loads. Negotiated hog prices are $0.99 lower at $75.14 per cwt on 
3,757 head. The swine/pork market formula price is listed at $92.53 per cwt. 
Dow Jones estimated Monday's hog slaughter at 475,000 -- steady with a week ago 
and 15,000 less than year ago levels. The CME Lean Hog Index is estimated at 
$91.51 for Sept. 24.

   Rick Kment can be reached

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