The sharp drop in stock markets overnight and weakness in gold and energy markets leaves a negative tilt for economic sensitive commodity markets such as cattle.

The technical action last week appeared negative. October cattle closed 22 lower on the session Friday and down 152 points for the week. The market found some early support from a more positive tilt to outside market forces, the highest beef trade since June and a bounce in hogs. Talk that the sell-off was a bit overdone and ideas that slaughter levels will continue to decline into the November-December time frame added to the positive tone.

Positioning ahead of the USDA Cattle-on-Feed report helped to limit the advance last Friday. The report was considered positive to the market as placements onto feedlots in August came in at 89.1% of last year which was down from trader expectations for a 6% decline. The low placements should cause market-ready slaughter supply to tighten for the December-March time frame and this is supportive for the December and February contracts. Marketings for August came in well below trade expectations (95.5%) and this would suggest a few more cattle were available for slaughter in September than expected and this might be considered somewhat negative for the October contract. On-feed supply for September 1st was slightly below expectations at 99.4% from last year as compared with 100.7% on August 1st and 102.7% on July 1st.

Boxed beef cutout values were down $1.11 at mid-session Friday and closed $1.65 lower at $193.34. This was up from $191.54 the prior week. Slaughter for Friday came in at just 101,000 head which was well below expectations as packers seem to be cutting back on kills. Weekly slaughter came in at 623,000 head for the week which is down 5.9% from last year.

The Commitments of Traders reports as of September 18th showed Non-Commercial traders were net long 59,881 contracts, an increase of 11,581 contracts for the week and the buying trend from funds is seen as a positive force. Non-Commercial and Nonreportable combined traders held a net long of 37,341 contracts, up 14,527 contracts for the week. Commodity Index traders held a net long of 117,429 contracts, up 1,000.

Average dressed steer weights for the week ending September 8th came in at 870 pounds, up from 865 the previous week and up from 849 pounds last year. This matches the record high steer weight posted on October 10th of 2009 and weights normally increase into mid-October. Frozen pork in cold storage as of the end of August came in at 429.8 million pounds, about unchanged from last year and down 7% from the previous month. Normally, stocks increase by 2% for the month so the 7% decline is considered bullish.

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