Cattle:

Urner Barry's Cattle on Feed poll suggests September feedlot placements, new inflows into feedlots, at -4.2% year/year (ALDL -2.8%). These numbers determine a part of March - July offered fed cattle supplies. This lightly lower placement also fits in with prior months. Including our own September estimate, January - September placement run -2.1%. This group determines Q4 through a part of Q2 feedlot offerings. Trade estimate for September outflows from feedlots, marketings, were noted at +2.2% (ALDL +2.0%). This helps bring the October 1 On Feed number down from +0.6% year over year to +0.3% as of October 1 (ALDL +0.1%).

The Cattle on Feed report every three months also shows steer and heifer numbers in the feedlot. The prior July 1 report showed heifers at 39.6% of the feedlot. That was the second largest in modern history. We do not expect much of a change for the coming October 1 count. We are not hearing of any real jump in heifer retention.

There was no change to USDA's kill estimate for last week, 608,000 head, on today's daily update. This was -4.7% year/year. The prior week was also a low one at -4.9%.

Wholesale beef, through this morning's +1.33 trade, now has a rally of +25.70 over 17 days. This has far exceeded last year's temporary +12.52 rally. Cash beef is priced +5% vs. last year.

Cash cattle has picked up $3 in three weeks. The South moved last week at $188. Nebraska sold at $188 live and $296 dressed. Cash cattle is priced+2% vs. last year.

Futures have removed much of their prior concerns over future declines in beef demand. They now suggest cash cattle will run $186 through the end of the year. For the first four months of next year they suggest $185 - $188. That would be +2% to +3% year/year.

Thursday's monthly US retail sales, covering September activity, were lightly positive. The Commerce Department reported a +0.4% increase over August. That was over the trade estimate of +0.3%.

Weekly jobless claims on Thursday were reported at 241,000 for last week's activity. That was under the prior week's 261,000. The trade expected 260,000 for this report.

USDA sees 2024 beef production at 27.000 billion. They now have 2024 production minimally over 2023. For this Q4 we are in now they see 6.900 billion, +1.3% year/year. The bullish 2025 has been reigned in a bit, but is still there. At 25.925 they are at -4.0%. Per capita supply offered that is the main price driver for beef and cattle prices. This measurement is now only -2.9% from 2024.

December live cattle futures are in an uptrend. The next upside target would be a an upside intraday gap recently opened, the 10/14 close of 187.92. Beyond that you have one at the 3/21 close at 190.15. The next major test for bulls is to take out the highs from July, 189.47 from 7/29 and 190.07 from 7/5. Bears do not have control of this market. They certainly have a chance at this recent gap from last week, the 10/17 close of 186.17. But that could be filled without changing the trend. We hesitate to suggest the open downside gap on the intraday chart, the 9/11 close of 177.22, is realistic.

The November feeder cattle chart looks strong. The main thrust of this rally is accomplished, the obvious looking chart gaps. It must be pointed out the rally is still ongoing though. Whether it has enough strength to fill the next intraday gap, the 7/31 close of 255.12, is a question. Bears do not have pull in this market. They may be able to fill the small gap left last week at the 10/17 close of 245.75. There is another downside gap at the 9/18 close of 238.12. That may not be a realistic target…Rich Nelson

Hogs: 

Including this week, we'll now have six weeks in a row with lower than expected hog slaughter. December lean hog futures pushed above last week's highs by two ticks. A new high was made for this uptrend. This filled one of two upside gaps directly overhead. The day's close was also the best so far. We continue to hold from calling a top for futures with no clear change to cash market pricing.

USDA revised their estimate of last week's hog kill, out on Friday at 2.613 million head, down to 2.602. This drops last week's run from -0.1% year/year to -0.5%. This worsens the recent five week period of much lower than expected supply. USDA's current pork production estimate for Q4, +3.0%, would imply a projected kill +1.6% given current weights that are +1.4%.

The trade talk for this Saturday is a muted 145,000 head run. This may keep this week's kill limited to about 2.565 million. That puts this week at -1.8% year/year. This week will be six weeks of lower than expected supply. You may remember that the September Hogs & Pigs report suggested marketing numbers that will be slaughtered at this time at +3.5% year/year.

With smaller than expected supplies cash hog prices are not falling. Friday's trade was +0.44. Each of the past three weeks have seen slight gains. At this time of year that is quite a feat.

Futures are slowly pricing in the belief that we won't see the supply flow previously thought. Yes, slaughter will continue to seasonally rise. But instead of above last year offerings the trade now wonders if lightly below last year levels in recent weeks will remain. December futures are +17% from last year's December expiration. Our view of economic value is $70. That would hold a +4% premium.

Including Friday's +0.18 trade wholesale pork ended the week +2.12. Pork has gained in four of the past five weeks.

USDA sees 2024 pork production at 27.948 billion lbs. This is +2.4% from 2023. For this Q4 they see 7.365 billion, +3.0% from 2023. For 2025 USDA is at 28.515 billion, +2.0%. The measurement that determines price, pork offered to the US consumer after net exports and stocks are removed, is +1.0% from 2024.

The seasonal for futures is different than cash markets. Futures spend their time pricing in the coming low price environment set for winter. However, they typically over-estimate the coming cash price decline. The seasonal low for October, December and February futures is August 24. October typically rallies into its expiration. December futures typically post a minor rally to September 15, break to October 3 then one last rally to peak on October 16. February posts a similar convoluted rally until November 20. We would suggest the current major low from July 10 for October, July 15 for December, is THE major low.

On the chart, December lean hog futures remain in an uptrend. A new high and highest close was noted today for that uptrend. The first of two upside intraday gaps, the 4/24 close of 78.47, was filled today. The second is waiting at the 4/8 close, 79.55. Bears have not had control of this market for three months. There is one target for them, the 9/17 close of 72.17. There is one more way down at the major lows in July, the 7/15 close of 62.57 but that may not be a viable discussion...Rich Nelson