GENERAL COMMENTS:
Despite early week support in livestock markets, the bearish tone of livestock trade -- and most markets in general -- surrounding the trade tensions with China and recent proposed tariffs led to continued market liquidation Tuesday. October lean hog futures led the complex lower, falling $2.85 per cwt, with most nearby contracts holding triple digit losses. Weakness developed in live cattle trade on spillover pressure from the hog trade. Cash cattle interest remained silent Tuesday with packer bids and asking prices from feedlots still unreported. Given the lack of interest early in the week, active trade could easily be pushed into Friday. The National Daily Direct afternoon hog report was $0.94 lower ($65 to $80, weighted average $75.22) on 24,295 head sold. Corn futures were lower in light trade with September down 1 1/4 cents. Stock markets were higher in moderate trade with the Dow Jones up 278 points and the NASDAQ up 108 points.
LIVE CATTLE: Live cattle futures closed $0.67 to $1.17 lower. Initial firm support was short lived with traders backing away from morning beef value gains. Sharp losses in lean hog futures, as well as growing concerns of global economic weakness due to the ongoing trade dispute between China and the U.S., led to weakness in nearby and deferred live cattle trade. Although live cattle futures remain entrenched in a wide sideways trend, the bearish market tone of the last couple of weeks is creating additional uncertainty as buyers become more willing to stay out of the market. Beef cut-outs: higher, up $0.98 (select, $192.65) to up $1.08 (choice, $215.78) with good demand and light-to-moderate offerings, 122 loads (58 loads of choice cuts, 27 loads of select cuts, 9 loads of trimmings, 27 loads of coarse grinds).
WEDNESDAY'S CASH CATTLE CALL: Steady. Limited early week activity is expected to be seen Wednesday morning, although packer interest is likely to show initial token bids at some point through the day. Active trade is likely to be pushed off until later in the week.
FEEDER CATTLE: Feeder cattle futures closed mixed, $0.22 higher to $0.80 lower. Futures pulled away from initial early morning gains as traders were caught between weaker corn markets and live cattle pressure. Narrow trading limits developed in all nearby trade, allowing traders to adjust positions throughout the trading session. The widespread softness in live cattle futures and spillover pressure from lean hogs led to more aggressive losses in 2020 contracts, as traders continue to take precautions in the event of long-term pressure. CME cash feeder index for 8/5 is $141.61, unchanged.
LEAN HOGS: Lean hog futures closed $0.42 to $2.82 lower. Sharp losses flooded into lean hog futures at midday Tuesday. The actively traded October contract fell $2.82 per cwt to close at $64.60 per cwt, its lowest level since late 2018. Although prices still remain well above contract lows, the essentially unchecked market slide from a July high of $81.80 is sending bearish signals through the entire complex. Growing concerns about the future of the pork trade with China is causing many traders to question just what to do with the large U.S. pork production levels that still exist. Pork values shifted higher following moderate-to-firm gains in most primal cuts. Pork cutout values added $0.60 per cwt, moving to $88.73 per cwt on 346 loads. CME cash lean index for 8/2 is $84.68, up $0.04. DTN Projected lean index for 8/5 is $84.19, down $0.49.
WEDNESDAY'S CASH HOG CALL: $1 to $2.50 lower. Continued market pressure is expected in cash hog trade as packers try to quickly adjust to the recent widespread pressure in the market, while securing just enough hogs to meet daily procurement levels in the eroding market environment. Most bids are expected $1 to $2 per cwt lower. Wednesday slaughter numbers are expected at 474,000 head. Saturday runs are expected at 44,000 head.
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