Weekly Cattle and Hog Slaughter Expected to Be Huge

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Tuesday September 12, 2017


Volume in LH futures was 59,600 yesterday with open interest down 900 cars. Not much new to discuss at this moment. Cash was lower yesterday and expected to be lower again today. Why not, it’s working nicely for the pork packer. The kill was larger at 450,000 and the weekly kill is going to be huge if not record large at 2.425 million pigs. Cutout was stable and hovering just above $82.00. Look for support to be tested again today. We’re long term bullish based upon record large demand for pork. At the same time, I don’t see any reason to “bet the farm” on a real large position. We’ll hold a few Oct calls and wait for some confirmation that the seasonal bottom is in place.


Live cattle finished mixed with Oct a touch lower yesterday. Volume of trade was 87,200 with open interest down about 800 cars. Not much to conclude from this information. A new low close in the Oct/Dec spread and the fact that the choice/select spread stands at $1.18 are both negative signals in my opinion. Feeders continue to attract excellent demand which I find surprising on the backside of terrible losses on close-outs. We’re anticipating a lower cash steer trade this week with a test of support likely in front month LC futures. The show list is a bit larger this week and weights are expected to rise again. The FCE has 1,063 registered for sale on Wednesday with KS holding 600 head and TX 350 head. The weekly cattle slaughter is going to be huge at 635,000, up more than 5% from last year. Cash steer prices and cutout values are very close to year ago levels. Is it realistic to expect prices to hold at last year’s levels given the fact that 4th quarter beef production is going to be huge and record large? This will occur in tandem with record large pork and poultry production during the 4th quarter. Resistance in Oct LC stands at 10980 with support at 10470.

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