GENERAL COMMENTS:
Livestock and outside markets tumbled Monday with limit losses immediately flooding into all cattle contracts. Firm gains seen in hog trade based on growing fundamental and firming technical support quickly eroded in the last half of the day following widespread losses in other markets. Cash cattle trade was silent Monday as the typical showlist distribution and inventory-taking is being done. Given the overall light trade last week, packers are expected to be short-bought, but this may have little impact at this point given the price uncertainty. Until futures prices are able to stabilize, it is likely that packers and feedlot managers will remain unwilling to put forth any bids or asking prices. How Tyson and other processors distribute the workload around the system following the fire at Tyson's plant Friday will take time, but will be a major indication of where cattle prices will go in the coming days and weeks. The National Daily Direct afternoon hog report was $2.02 lower ($62 to $72, weighted average $68.85) on 7,847 head sold. Corn futures closed limit lower following the bearish USDA report with September down 25 cents. Stock markets were lower in light trade with the Dow 420 points higher and the NASDAQ down 111 points.
LIVE CATTLE: Futures closed limit down ($3 lower). Live cattle futures opened limit lower Monday morning and didn't budge the entire session. This not only created a bearish market shift, but the lack of trade activity during the day and expanded trading limits will potentially allow for even more weakness once markets open Tuesday morning. The driver behind this swift and aggressive shift lower was Tyson's beef plant in Kansas that was partially destroyed by fire. Although Tyson said it will rebuild the plant and pay workers until the plant reopens, there are legitimate questions about where the lost capacity will go. It is expected that cattle will be moved to other Tyson plants, as well as other beef packers ramping up chain speed in order to absorb a portion of the 6,000 head per day the plant slaughtered. But even a portion of this capacity that goes unfilled will have significant effects on short-term cattle prices. The biggest concern is that there is no way to accurately measure the impact on cattle prices at this point. Beef cut-outs: higher, up $3.98 (select, $197.79) to up $2.25 (choice, $218.62) with light-to-good demand and heavy offerings, 151 loads (78 loads of choice cuts, 33 loads of select cuts, 20 loads of trimmings, 20 loads of coarse grinds).
TUESDAY'S CASH CATTLE CALL: Steady to $2 lower. Limited cash market direction is expected to develop early in the week. Until futures trade stabilizes, it is likely that cash markets will remain silent. This could delay activity until late in the week.
FEEDER CATTLE: Futures closed $4.50 lower. Feeder cattle futures followed the lead of live cattle trade, holding limit losses the entire session. The short-term direction of the cattle complex continues to be shaken by the loss of Tyson's packing plant in southwest Kansas. The ripple effect this is having over the weekend and during Monday's trading session is based on uncertainty about when and how many cattle can be absorbed at other packing plants. It is also uncertain just how long the process of increasing daily production will take, which is the main pressure on feeder cattle trade. CME cash feeder index for 8/9 is unavailable at this time.
LEAN HOGS: Futures closed mixed, $0.15 higher to $0.90 lower. Strong initial gains developed in lean hog trade Monday morning. But the combination of limited volume, limit losses in cattle and lower corn trade left buyers remaining extremely vulnerable and outnumbered, resulting in late-day pressure sweeping through the entire complex. Renewed pressure in stocks trade with the Dow Jones Index holding losses near 450 points also contributed to the bearishness through the entire complex. It is expected that narrow trading ranges will develop early Tuesday despite some increased volatility in outside markets and cattle trade. Pork cutout values slipped lower following mixed prices in primal cuts. Pork cutout values fell $0.25 per cwt, moving to $90.19 per cwt on 267 loads. CME cash lean index for 8/8 is $82.33, down $0.52. DTN Projected lean index for 8/9 is $81.75, down $0.58.
TUESDAY'S CASH HOG CALL: Steady to $2 lower. Continued pressure is expected Tuesday morning as traders look for increased longer-term direction and the potential to stimulate wholesale pork values over the near future. Most bids are expected to remain $1 to $1.50 per cwt lower early Tuesday. Tuesday slaughter numbers are expected at 468,000 head.
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