Tuesday Closing Livestock Market Update - Traders Cautiously Look for Additional Support

GENERAL COMMENTS:

It was a rather uneventful day throughout the livestock sector, as traders let most of the contracts wane lower, wanting more reassurance that the market does indeed support higher trade. Heading into Wednesday's trade, seeing where cash cattle prices land will be critical as feedlots have an opportunity to demand at least $1.00 to $2.00 more. Hog prices closed lower on the National Direct Afternoon Hog Report, down $0.45 with a weighted average of $105.54 on 7,166 head. December corn is down 1/2 cent per bushel and December soybean meal is up $6.10. The Dow Jones Industrial Average is down 85.79 points and NASDAQ is down 180.13 points.

LIVE CATTLE:

The live cattle contracts endured a slight regression in their nearby contracts, but the market's deferred contracts still rounded out the day higher. The market's set ack simply comes as a technical pause as traders look to see how sustainable this rally is. With boxed beef prices likely to rally over the next two to three weeks to keep up with the market's swift demand, packers may run slightly more aggressive kill schedules and even dip into the cash cattle market ever so slightly. All these points que positive accolades and should bring confidence. August live cattle closed $0.52 lower at $122.92, October live cattle closed $0.77 lower at $128.42 and December live cattle closed $0.50 lower at $133.47. There were a handful of cattle that traded in Iowa for $195 to $200, but largely the cash cattle market was idle throughout the day. Significant trade isn't expected to transpire until sometimes Wednesday, most likely after the online auction. Tuesday's slaughter is estimated at 119,000 head, 2,000 head more than a week ago and steady with a year ago. The CBP Texas Cash Pool listed 291 head but no trade was reported. Bids were at $119.05, $117.40, $119.13, and $119.

Boxed beef prices closed higher: choice up $1.80 ($269.73) and select up $3.02 ($253.94) with a movement of 157 loads (87.03 loads of choice, 39.31 loads of select, 15.79 loads of trim and 14.84 loads of ground beef).

WEDNESDAY'S CASH CATTLE CALL: $1.00 to $2.00 higher. If feedlots will stick together and resist the urge to settle for steady prices, the market has at least $1.00 or $2.00 more to give than what last week's weighted averages were. The tricky part about the current cash cattle market is that feedlots and packers know that packers don't need a large quantity of cattle, as they've been committing cattle for the deferred delivery for weeks on end. So, if the market is going to achieve the advancement this week, feedlots will have to rally along one another and resist the urge to fold their hand at steady prices.

FEEDER CATTLE:

The feeder cattle contracts may have closed lower, but it's not because the market lacks fundamental support. Instead, traders hit the sidelines of the market seeming to want to see renewed follow-through support before they confidently continue to rally the market. But with knowing that there are fewer calves roaming the countryside this year than years past -- all while the April live cattle contract trades a mere $0.15 away from $140 and cash cattle are expected to trade higher this week -- traders are likely to see the follow-through support they're looking to find before the week's end. August feeders closed $1.50 lower at $160.70, September feeders closed $0.82 lower at $164.00 and October feeders closed $0.50 lower at $165.95. Thankfully, the market didn't see any pressure from the corn market as it closed steady to $0.01 lower in most of its nearby contracts. At Oklahoma National Stockyards in Oklahoma City, Oklahoma, compared to last week, feeder steers and heifers sold $2.00 to $5.00 higher. Steer calves traded $4.00 to $6.00 higher and heifer calves traded $1.00 to $4.00 higher. The CME Feeder Cattle Index for July 26: up $0.12, $153.97.

LEAN HOGS:

The lean hog market didn't do a whole lot throughout the day, but given that pork cutout values closed slightly higher and that Tuesday's slaughter is estimated at a snappy 474,000 head (I know, it's not a run away day in terms of slaughter but compared to what's become normal it was a hefty day), the market didn't round of the day defeated by any means. August lean hogs closed $0.07 higher at $107.47, October lean hogs closed $0.57 lower at $92.52 and December lean hogs closed $0.67 lower at $84.85. The market may continue to chop sideways until Thursday, when the market's export report could give the market some steam to roll higher or send contracts rolling lower depending on its outcome. Pork cutouts totaled 339.85 loads with 314.15 loads of pork cuts and 25.70 loads of trim. Pork cutout values: up $0.55, $123.49. Tuesday's slaughter is estimated at 474,000 head, 5,000 head more than a week ago and steady with a year ago. Monday's hog slaughter was revised to 463,000 head, 5,000 head less than what was originally stated. The CME Lean Hog Index for July 23: up $0.01, $112.21.

WEDNESDAY'S CASH HOG CALL: Steady. Packers have been able to secure hog supplies without breaking the bank this past week and they will likely do so again in Wednesday's market.