GENERAL COMMENTS:
Firm, late-day gains held in lean hog futures
based on underlying outside market support and increased commercial
buyer activity moving back into the market. Cattle futures held early
gains, but eroded near closing bell as traders focus on uncertain demand
through late 2019. December corn futures closed 4 3/4 cents lower.
Stock markets are higher in moderate trade. Dow Jones is 236 points
higher with NASDAQ up 29 points. Light cash cattle trade developed in
parts of Nebraska at $106 per cwt live basis. The amount of cattle
reported sold is not enough to establish a good trend for the weekly
market, but it did get the ball rolling. Most trade will be delayed
until Thursday or Friday, although both sides desire to wrap things up
sooner than later with the long holiday weekend approaching. Limited
bids in Texas at $101 per cwt live basis and $175 dressed basis in the
North. Asking prices have not deviated from early week levels at $108 in
the South and $178 to $180 in the North. National Daily Direct
afternoon hog report is $1.52 lower with a weighted average of $60.33
per cwt. Full range of $52 to $63.00 per cwt on 6,075 head sold.
LIVE CATTLE: Live cattle futures faded going
into the closing bell ($0.32 higher to $0.72 lower). Limited support
seen early in the Wednesday session evaporated through the end of the
day with lightly traded August futures the only contract to hold a gain
at closing bell. Other nearby live cattle futures fell 57 to 70 cents
per cwt as traders slowly but steadily backed away from Monday's gains.
The fact that the Japan trade agreement announcement is showing limited
follow-through support is disappointing. There still seems to be growing
uncertainty as to how supportive buyers will be in the fourth quarter.
After markets closed, Ag Secretary Sonny Perdue announced that he
directed an investigation into recent beef pricing margins to determine
if there is any evidence of price manipulation, collusion, restrictions
of competition or other unfair practices. And, if there were,
enforcement actions will be taken. This has been a major issue over the
last two weeks with beef values and live cattle prices diverging in
opposite directions following the plant fire on Aug. 9. Beef cut-outs:
mixed, $1.10 higher (select, $211.81) and down $3.80 (choice, $323.96)
with moderate demand and offerings, 148 loads (63 loads of choice cuts,
27 loads of select cuts, 10 loads of trimmings, 48 loads of coarse
grinds).
THURSDAY'S CASH CATTLE CALL: Steady. Interest is
developing on both sides with increased packer bids likely through the
morning Thursday. It is uncertain just how far feeders will move away
from early asking prices given current packer margins and aggressively
strong beef values.
FEEDER CATTLE: Market weakness developed
Wednesday despite morning support ($0.20 higher to $0.92 lower). Limited
activity developed late Wednesday as traders slowly but steadily pulled
back from earlier gains across the entire complex. This continued to
spark some additional concerns that follow-through pressure may continue
to develop through the end of the week. The strong support in outside
markets seemed to bring positive market direction early in the day,
although the increased corn prices are starting to be viewed as bearish
once again in feeder cattle trade while traders became disappointed by
the softness developing in most live cattle trade. CME cash feeder index
for 8/27 is $138.62, up 0.24
LEAN HOGS: Late-day gains supported renewed
buyer interest ($0.27 to $1.30 higher). Moderate support developed
Wednesday afternoon following strong initial losses in nearby contracts.
Early 2020 contracts were clearly the winner at midweek with
triple-digit gains in February through August contracts. The move higher
still leaves the market with a weak undertone given the recent price
pressure as well as uncertainty about an upcoming trade deal with China.
But reports focusing on sharp increases in pork prices in China and the
long-term expectation that pork supplies in China will continue to not
meet domestic demand has caused increased buyer support to redevelop.
October futures remain less optimistic as time may be running out in
spot-month contracts to see significant fundamental changes in the
industry. Pork cutouts continued lower following further pressure in
belly cuts. Pork cutout values fell $2.06 per cwt, moving to $72.01 per
cwt on 308 loads. CME cash lean index for 8/26 is $73.52, down 0.98. DTN
Projected lean index for 8/27 is $72.63, down 0.89.
THURSDAY'S CASH HOG CALL: Steady to $2 lower.
Continued weakness is still developing across lean hog futures trade,
although recent gains in futures may limit cash market declines at the
end of the week. Thursday slaughter numbers are expected at 481,000
head. Saturday runs are expected at 83,000 head.
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