Light trade developed in several areas of cattle country Wednesday afternoon. Limited live trade in the South was reported at $111 per cwt, generally $1 per cwt lower. Northern trade was mostly dressed activity, ranging from $180 to $185 per cwt. Trade in the upper end of this range was scheduled for delayed delivery to regional packers. It is likely that additional cash market activity will be needed before the end of the week. With a new month on the books, price levels are far from set, but the previous weakness in futures may limit optimism through the end of the week. Asking prices remain at $114 and higher live basis, and $186 to $187 dressed. Limited futures trade is expected early Thursday morning as traders transition into the month of August. Follow-through selling pressure is expected to be met by early-morning and initial-month short-covering. Although moderate-to-wide market shifts may quickly develop as trade opens, the underlying tone of the complex is expected to remain under light-to-moderate pressure once again. Traders will also closely monitor outside market direction following the decision by the Federal Reserve to lower prime lending rates because it may have additional market implications during early August.
Lean hog futures remain under pressure following another aggressive and swift shift lower Wednesday. Although traders are entering the month of August, and the hope is that renewed noncommercial support will filter into the complex, the bearish market shifts in the complex are impossible to overlook. After posting limit losses Wednesday, the entire complex has access to expanded trading limits Thursday. This will allow lean hog futures prices to move unrestricted with a range of $4.50 per cwt in either direction. The aggressiveness of the market shift lower has been the most concerning, as prices have fallen $10.80 per cwt lower in October contracts the last seven trading sessions. Although futures are still moderately above summer lows set in early July, the bearish tone sweeping over the market is putting these support levels in question at this point. As of Aug. 1, USDA's Market News is revising how it puts out regional swine market reports. Due to the lack of consistent daily volume in regional areas, negotiated sales totals and price ranges will not be reported in regional reports. Only weighted average price levels. National daily hog reports will remain unchanged. Cash bids are expected $1 lower to $1 per cwt higher with most bids steady to weak. Expected slaughter Thursday is at 475,000 head. Saturday runs are expected at 34,000 head.
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Firming beef demand is expected to continue through the end of the summer, with expectations of moderate-to-strong movement seen ahead of and surrounding the Labor Day weekend. This could help to add increased underlying support through early fall.
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Triple-digit losses in live cattle and feeder cattle trade Wednesday created concerns that follow-through pressure will develop during early August.
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Despite the late-month pullback in feeder cattle trade, contracts are holding at the top end of the trading range and near summer highs. Continued underlying support may help to bring additional firmness to feeder cattle trade during early August.
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Wholesale beef values have struggled to gain additional support during late July as traders focusing on current product availability during the traditional sluggish summer lull of July and early August.
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Pork cutout values continue to firm as increased underlying pork demand remains strong. The continued active support of domestic pork demand is helping to offset export losses even though production remains strong through 2019.
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Limit losses at the end of July not only created technical pressure in the entire complex, but the overall lack of support may test long-term lows set in July, sparking a long-term bearish trend once again.
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The sharp losses over the last week in lean hog futures complex has left the complex extremely oversold. This is likely to spark wide-ranging gains when the intensity of selling pressure slows, creating the potential for aggressive buying to move back into the complex during early August.
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Lack of direction of information following trade talks with China was disappointing to the entire ag market midweek. Although expectations had been set relatively low for the talks, the lack of information is creating additional concerns that progress may not be seen for a long time.
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