General Comments:
Cash cattle trade continues to firm through the week with the focus Wednesday on Northern dressed trade at $160 per cwt. This is generally $2 per cwt higher than last week's average. Southern trade remained steady with earlier week price levels, but between $97 and $97.50 per cwt, which is generally $1 higher than last week. Asking prices remain at $498 to $100 per cwt live and $162 per cwt dressed, although additional bids early Thursday could be steady to slightly higher than midweek levels. For the most part, it is expected that the tone of cash market trade has been set, although at this point, some light-to-moderate sales are expected to develop over the next couple of days. Cash cattle basis levels remains weak, hovering $7 per cwt under October futures. With ample cattle available in feedlots needing a processing home, there continues to be limited aggressiveness on the side of packers to boost cash markets significantly higher. Live cattle futures have regained significant technical support over the last two trading sessions, although the overall lack of changes in market fundamentals could temper further gains in the near future. October futures are trading at $106 per cwt, within striking distance of short-term highs. Given the inability for aggressive changes in cash cattle trade and beef values struggling to move steadily higher, there continues to be uncertainty about the sustained buyer support in live cattle or feeder cattle trade through the end of the week. Thursday's slaughter is expected at 119,000 head.
Lean hog futures continue to remain under pressure through the end of July with traders quickly pulling away from recent support levels in all nearby contracts. August contracts continue to lead the market lower, breaking away from month-long highs earlier in the week, while the concern of current hog supplies and uncertain demand growth continues to limit buyer support through the end of the week. October futures have fallen below $50 per cwt once again. Although this is not a technical benchmark given that prices are well within the recent sideways trading range, it does remain a psychological barrier that could limit late week support in the entire complex. Average hog weights last week fell another 1.2 pounds per hog to 281.1 pounds. Although hog weights continue to move lower week after week, current levels are nearly 4 pounds heavier than last year's level. This continues to focus on aggressive year-over-year production gains. Although this is no surprise to the market, it will continue to limit upside price potential, especially given the lack of certainty about demand growth through the last half of the year. Traders will focus on the morning Export Sales and Shipments report to determine the amount of new sales to China last week, while also focusing on other major export destinations. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Thursday is expected at 475,000 head. Saturday runs are expected near 186,000 head.
| BULL SIDE | BEAR SIDE | ||
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Firm gains in cash cattle this week is creating firm expectations of follow-through support during the end of the week. Live cattle traded in the South at $97 to $97.5 per cwt and $160 in the North, $1 to $2 per cwt higher than last week.
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Limited support in choice beef values over the last several days has created concern that even though wholesale beef values may be at or near seasonal lows, strong upside market support may be limited in the coming weeks. This could limit further support in live cattle futures.
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Active buying redeveloping in feeder cattle futures have pushed prices within $1 per cwt of four-month highs. If follow-through buyer support can move through these resistance levels at the end of the month, further technical support is likely during early August.
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Cash cattle prices continue to trade at a firm discount to futures trade, weakening basis levels over the last couple of months. This could further limit widespread support in cattle trade in the upcoming weeks.
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Further reductions of hog carcass weights last week may make is harder to keep the hog market current. Even the weights remain above year-ago levels, keeping hog weights manageable is expected to create long-term support through the entire complex.
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Cash hog values have pulled away from the recent strong cash buyer support last week. This could indicate that packers are able to gain access to ample hogs given the recent price support but could quickly limit additional cash market support through the end of the month.
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The weekly Export Sales and Shipments report will be closely watched as traders are looking for follow-through buyer support from China, as well as active movement from other traditional buyers through the month of July.
| 4) |
Labor issues at packing plants continue to be a daily struggle in order to meet expected slaughter projections. The focus on the ability to keep and maintain full production crews will likely be a major challenge for the entire meat industry through the end of the year.
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| #completeherdhealth |
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