GENERAL COMMENTS:
Friday's trade favored the cattle contracts while the lean hog contracts were left high and dry. Looking to next week, traders will have a lot to sort out and manage in both the hog and cattle markets. Cattle prices could be pressured if boxed beef prices commit to trading lower, and the lean hog market continues to wonder when a top is in store. Hog prices closed lower on the National Direct Afternoon Hog Report, down $0.46 with a weighted average $119.26 on 6,513 head. July corn is down 14 1/2 cents per bushel and July soybean meal is up $1.70. The Dow Jones Industrial Average is up 13.36 points and NASDAQ is up 49.09 points.
From Friday to Friday livestock futures scored the following changes: June live cattle up $1.88, August live cattle up $1.95; August feeder cattle up $1.25, September feeder cattle up $0.78; June lean hogs up $3.18, July lean hogs down $0.62.
LIVE CATTLE:
The live cattle contracts rallied off the support that leaked over from the feeder cattle contracts. Looking to next week, the live cattle complex could be subject to some stark changes as boxed beef prices are expected to be lower and the cash cattle market could feel pressured as well. June live cattle closed $1.12 higher at $118.70, August live cattle closed $1.47 higher at $120.02 and October live cattle closed $1.57 higher at $125.77. Southern live cattle traded for $119 to $120 and dressed cattle traded for mostly $190 to $191. Friday's slaughter is estimated at 119,000 head, steady with a week ago and 5,000 head more than a year ago. Saturday's slaughter is estimated at 70,000 head, 28,000 head less than a week ago and 3,000 head less than a year ago.
Looking at the week's average boxed beef prices comes with some concerns. Throughout the week, choice cuts averaged $338.33 (down $0.23 from last week) and select cuts averaged $307.77 (down $3.04 from last week) with a movement of cuts, grinds and trim only totaling 495 loads. We knew at some point the boxed beef market was going to top, and with Friday's afternoon close fully lower -- and on a small, small movement -- the market is making its move. Current boxed beef prices are outrageous given the fact that there isn't a shortage of cattle and that consumers are being gouged horrendously. But just as producers want their consumers to be taken care of, they are also concerned about that's going to happen to the cash cattle market once the boxed beef deterioration starts.
Boxed beef prices closed lower: choice down $0.69 ($337.56) and select down $5.19 ($305.21) with a movement of 78 loads (39.26 loads of choice, 16.04 loads of select, 11.14 loads of trim and 11.07 loads of ground beef).
MONDAY'S CASH CATTLE CALL: Steady to somewhat lower. If packers allow the market to be steady, it will solely come in the form of charity bids. If the boxed beef market commits to trading lower, then the cash cattle market will undoubtedly feel the market's pressure, which is concerning given that prices are only at $119 to $120 live.
FEEDER CATTLE:
The corn market's lower transcend Friday was just the opportunity that the feeder cattle contracts desperately needed. After battling higher corn prices throughout much of the week, the contracts jumped higher upon Friday's break and closed well over $2.00 higher in most of the nearby contracts, and over $1.00 higher in the deferred. August feeder cattle closed $2.77 higher at $151.17, September feeders closed $2.62 higher at $153.52 and October feeders closed $2.35 higher at $155.47. All eyes continue to be on the August feeder cattle contract, as some producers are beginning to think about marketing their calves already. Seeing the August contract close above $150.00 is comforting, as it danced below that point several times throughout the week. At Herreid Livestock Market in Herreid, South Dakota, compared to two weeks ago, the market's best test on steers were of those weighing 900 to 1,000 pounds, which sold $1.00 to $5.00 higher. The best test on heifers was seen on those weighing 750 to 800 pounds, which traded steady to $1.00 higher. Drought continues to be the matter of discussion at sale barns as producers are having to fight dire drought situations in a lot of the Northern cow-calf states. The CME Feeder Cattle Index for June 10: up $0.32, $140.23.
LEAN HOGS:
Other than the soon to be expired June lean hog contract, the lean hog contracts were lower Friday with losses above $1.00 seen in the nearby contracts. The market is thriving on demand amid scarcely thin supplies, but traders are racking their brains and trying to better understand when a top may appear. Gambling in Vegas may be a thrill, but traders are getting the same type of hype from this year's lean hog market. July lean hogs closed $1.35 lower at $119.97, August lean hogs closed $1.72 lower $116.97 and October lean hogs closed $1.30 lower at $96.60. Pork cutouts totaled 273.32 loads with 241.94 loads of pork cuts and 31.38 loads of trim. Pork cutout values: down $1.51. Friday's slaughter is estimated at 457,000 head, 21,000 head less than a week ago and 26,000 head more than a year ago. Saturday's slaughter is projected to be around 53,000 head, 143,000 head less than a week ago and 187,000 head less than a year ago. The CME Lean Hog Index for June 9: up $1.20, $119.91.
MONDAY'S CASH HOG CALL: Steady. Gambling where next week's market will land is just that ... a gamble. Supplies are tight, which should mean prices keep scaling higher, but at some point, this market will indeed see a top.
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