Thursday Closing Livestock Market Update - Is That a Rally in the Making or Just the Fourth of July Spirit?

GENERAL COMMENTS:

Cattle contracts really tested the market Thursday afternoon and flirted with nearby resistance. It seems odd that, with the backlog of cattle, prices would rally, but nevertheless, they did. Hog prices closed lower on the National Direct Afternoon Hog Report, down $0.07 with a weighted average of $28.61 on 5,558 head. September corn is down 7 cents per bushel and December soybean meal is down $0.40. The Dow Jones Industrial Average is up 92.39 points and NASDAQ is up 53.00 points.

From Thursday to Friday, livestock futures scored the following changes: August live cattle up $3.38, October live cattle up $3.21; August feeder cattle up $2.28, September feeder cattle up $2.07; July lean hogs down $0.55, August lean hogs up $1.08.

LIVE CATTLE:

Live cattle contracts are feeling like the daring type these days. Rallying the market upwards of $2.00 in nearby contracts and upwards of $1.00 in deferred, all while knowing there's a mountain of cattle to be processed and a looming wonder of how third quarter boxed beef demand will remain. August live cattle closed $2.10 higher at $99.40, October live cattle closed $2.00 higher at $102.67 and December live cattle closed $1.42 stronger at $105.92. Time is the best answer for unknown questions in the marketplace, and as time works through July we will better understand where these prices really need to lay. There was another light round of trade in Thursday afternoon that was mostly steady with the trade earlier in the week. Southern live cattle traded for $91 to $96 this week, and Northern cattle traded for $148 to $155. Thursday's slaughter is estimated at 121,000 head, 1,000 head more than a week ago and year ago figures are incomparable given that it was the Fourth of July.

Thursday's USDA Actual Slaughter Under Feder Inspection shared a mixed bag -- lower slaughter than initially expected, but lighter weights. For the week ending June 20, cattle slaughter totaled 645,661 head, whereas the USDA Estimated Weekly Meat Production Under Federal Inspection estimated the week at 656,000; equating to 10,339 fewer head. But it was encouraging to see that cattle weights had dropped. Live cattle weights totaled 1,364 pounds (eight pounds lighter than the previous week) and dressed weights totaled 828 pounds (four pounds lighter than the previous week).

Boxed beef prices closed higher: choice up $0.06 ($205.44) and select up $0.33 ($198.76) with a movement of 156 loads (87.50 loads of choice cuts, 16.28 loads of select, 21.29 loads of trim and 31.15 loads of ground beef).

MONDAY'S CASH CATTLE CALL: Lower. The current volume of supply is a burden that will keep live cattle prices depressed.

FEEDER CATTLE:

Feeder cattle contracts stuck their neck out on the line and really test the market heading into the Fourth of July holiday. The board saw significant gains and rallied upwards of $1.47 to $2.55 throughout the market. On one hand, this could have been a weird holiday disruption as the week is shortened and the feeder cattle contracts simply rallied side-by-side the live cattle market -- or seeing that the market tested resistance planes, this could be a grab for higher ground heading into July. 

August feeders closed $1.80 higher at $134.87, September feeders closed $1.82 higher at $135.85 and October feeders closed $1.80 higher at $136.70. The CME feeder cattle index 7/1/2020: down $0.08, $129.05.

LEAN HOGS:

The lean hog complex leaned into the last trading minutes of the day and closed mostly higher throughout the complex. The rally came as a last-ditch effort to close higher after the market had traded mostly lower earlier in the day. July lean hogs closed $0.07 lower at $44.72, August lean hogs closed $0.12 stronger at $49.20 and October lean hogs closed $0.07 higher at $48.35. Pork cutouts totaled 444.53 loads with 398.09 loads of pork cuts and 46.44 loads of trim. Pork cutout values: up $2.84, $66.46. Thursday's slaughter totals 461,000 head, 11,000 head more than a week ago and year ago figures are incomparable given that it was the Fourth of July. The CME lean hog index 6/30/2020: up $0.04, $45.24.

Thursday's USDA Actual Slaughter Under Feder Inspection treated the hog industry better than cattle producers -- a higher slaughter than anticipated and lower weights. Actual slaughter totaled 2,593,128 head where it was projected to be 2,587,000 head; equating to 6,128 head more than anticipated. Hog weights were also down as live weights totaled 287 pounds (two pounds lighter than the previous week) and dressed weights totaled 214 pounds (two pounds lighter than the previous week).

MONDAY'S CASH HOG CALL: Lower. The complex closed slightly higher in nearby contracts and moderately higher in deferred, but the facts are still bearish for the cash hog market -- too much supply makes it incredibly hard for prices to rally.

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