GENERAL COMMENTS
Cash cattle interest is starting to slowly develop Tuesday afternoon, although actual cash trade is still likely to be delayed until later in the week. A wide price gap exists between token bids and asking prices which were floated across the market Tuesday. Bids developed at $108 to $110 live basis, with the higher end of these in the South. Dressed basis bids are $177 per cwt. Asking prices, on the other hand, remain at $115 and higher live basis, and $183 dressed basis. According to the closing report, the national hog base is $0.51 lower compared with the Prior Day settlement ($63.00-$68.00) weighted average $66.06. Corn futures are lower in light activity. July futures were 5 cents lower Tuesday. The Dow Jones Index is 197 points higher with the Nasdaq down 2 points.
LIVE CATTLE
Light to moderate pressure trickled into the live cattle futures ($0.77 to $0.67 lower). Spot August live cattle futures led the complex lower with increased overall pressure. This moved front-month prices to $108.05 per cwt. After prices rallied nearly $6 per cwt in the last two weeks, traders are well justified to focus on a moderate market correction, allowing for price shifts lower early in the week. The question facing the complex is: Will buyers reappear in the near future, resetting the goal of new short-term highs, or will the inability to push front-month futures above $109 per cwt be too much to spark any additional buying support through the rest of July? Answers may develop before the end of the week, as steady fundamentals will put more emphasis on technical shifts. Beef cut-outs: lower, $0.08 lower (select, $197.95) and down $0.17 (choice, $204.65) with moderate demand and offerings (67 loads of choice cuts, 38 loads of select cuts, 11 load of trimmings, 18 loads of coarse grinds).
WEDNESDAY'S CASH CATTLE CALL:
Steady $2 higher. Initial token bids have started to develop in cattle markets, although it is expected that very little interest will develop through the rest of the day. Bids and asking prices are expected to remain far away from each other over the next couple of days, limiting expected trade interest until later in the week.
FEEDER CATTLE:
Light to moderate pressure quickly developed in feeder cattle markets with overall weakness seen. This has allowed traders to back away from the strong market support of last week ($0.32 to $0.80 lower). Feeder cattle futures have eroded nearly $2 per cwt from short-term highs set last week, as traders remain focused on the overall lack of follow-through support during the week. The concern that traders will not be able to muster enough underlying support to break through February highs set at $155.57 per cwt has caused some traders to take positions as the potential of moderate weakness may develop in the next couple of weeks. CME cash feeder index for 7/23 is $148.27 down $0.22.
LEAN HOGS:
Early support in lean hog futures was unable to hold as nearby contracts started to erode near midday. This left markets mixed in a wide range ($0.87 lower to $0.77 higher). The strong market pressure over the last couple of weeks continues to be focused, not only on front-month August futures, but has pushed December contracts under $50 per cwt with prices settling at $47.52 per cwt. Even deferred contracts, which closed higher, have created concerns that renewed contract lows may redevelop if fundamental support is not seen in the near future. Pork values eroded, focusing on sharp losses in pork belly values which fell $8.53 per cwt. General weakness was seen in most primals, creating additional uncertainty given the widespread market pressure. Pork cut-out: $78.42 down $1.65. CME cash lean index for 7/20 $76.90 down $0.93. DTN Projected lean index for 7/23 $76.17 down $0.73.
WEDNESDAY'S CASH HOG CALL:
Steady to $2 lower. Follow-through market pressure is expected in cash trade early Wednesday morning. This may keep most bids at $1 per cwt lower with active trade developing through the rest of the week.
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