GENERAL COMMENTS:
The livestock contracts were able to close higher Wednesday afternoon, but that doesn't mean that a rosy marketplace lies ahead for all the markets. Both the lean hog and feeder cattle contracts had a supportive fundamental day, but the live cattle market most certainly did not, as processing speeds are running slower, the cash cattle market is seeing less being offered and showlists are likely to grow. Hog prices closed lower on the National Direct Afternoon Hog Report, down $3.06 with a weighted average of $106.78 on 5,226 head. December corn is up 2 3/4 cents per bushel and December soybean meal is steady. The Dow Jones Industrial Average is up 286.01 points and NASDAQ is up 133.07 points.
LIVE CATTLE:
It's one thing to see cash cattle prices trending lower amid the summer's usual lull, but one can't help but to be a little bitter when it also comes alongside historically high boxed beef prices and pitiful processing speeds. With an equation like that, feedlots don't have anywhere to win! Sure, Wednesday's live cattle complex may have closed mostly higher, but the spot August contract closed below the 40-day moving average ($120.62) and closed a whopping $0.08 above the 100-day moving average ($119.94). What's incredibly concerning with this week's developments is the fact that both Monday and Tuesday's estimated slaughter levels were revised lower, and that we know that a major plant intends to be dark this upcoming Friday and Saturday. Inadequate processing speeds affect not only beef consumers, as they are shorted the meat their desire, but it also affects feedlots as they watch their showlists grow, and to no fault of their own. August live cattle closed $0.27 higher at $120.05, October live cattle closed $0.55 higher at $125.25 and December live cattle closed $0.62 higher at $131.05. There was some light trade that developed in the South for $119, which is $1.00 softer than last week's business. Northern dressed cattle lightly tested the market from $195 to $197, but not very many head traded.
Wednesday's slaughter is estimated at 117,000 head - 2,000 head less than a week ago and 1,000 head more than a year ago. Tuesday's slaughter was revised to 117,000 head, which is 3,000 head less than what was originally stated.
The Fed Cattle Exchange Auction listed a total of 3,367 head, of which 426 actually sold, 426 were scratched from the auction and 2,037 head were listed as unsold, as they did not meet the reserve prices that ranged from $118 to $124. Opening prices ranged from $118, high bids ranged from $119. The state-by-state breakdown looks like this: Texas 2,889 total head, with 426 head sold at $119, 2,037 head unsold and 426 were scratched from the auction; Kansas 417 total head, all of which went unsold; Oklahoma 61 total head, all of which sold at $119.
Boxed beef prices closed higher: choice up $0.36 ($265.24) and select up $0.19 ($248.77) with a movement of 161 loads (80.61 loads of choice, 43.05 loads of select, 16.81 loads of trim and 20.72 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: $1.00 lower than last week. With processing speeds being dismal, packers aren't going to give the cash cattle market any kind offerings.
FEEDER CATTLE:
The corn market's piddly day of not doing much of anything favored the feeder cattle complex and allowed for the market to close confidently higher. August feeders closed $1.25 higher at $156.77, September feeders closed $1.52 higher at $159.30 and October feeders closed $1.32 higher at $161.10. Wednesday's close in the August contract moved the market above not only the 100-day moving average ($154.33) but also above the 40-day moving average ($155.24). A blended mix of support from higher trade on the futures market, lower corn prices and continued support throughout the countryside boosted the feeder cattle market's morale and leaves the market to hopefully trade strongly in Thursday's market. At Hub City Livestock Auction in Aberdeen, South Dakota, compared to last week, the market's best test on steers was of those weighing 850 to 950 pounds which sold $2.00 to $4.00 higher. The best test on heifers was of those weighing 650 to 700 pounds which sold steady to $2.00 lower and then also those weighing 900 to 950 pounds, which sold mostly $1.00 higher. The cattle were in a desirable rig as there was an even mix of cattle coming off grass and some coming in from feedlots. Pasture conditions are continuing to deteriorate and without any moisture in the nearby forecast, producers are continuing to call to list their cattle in the upcoming weeks sales. The CME Feeder Cattle Index for July 20: down $0.19, $150.71.
LEAN HOGS:
Wednesday's ability to close higher stemmed from the fact that pork cutout values are being met with continued demand from consumers and from the fact that, technically speaking, the board has a ways to trade before the market will run into any resistance. Traders see strong consumer interest and no nearby hurdles as an easy decision and confidently supported the lean hog market Wednesday. August lean hogs closed $1.57 higher at $106.57, October lean hogs closed $1.37 higher at $92.40 and December lean hogs closed $0.80 higher at $85.32. Looking ahead to Thursday's market, all eyes and ears are going to be anxiously awaiting the week's export report. If Thursday's export report is bearish, the market may drift lower as it was hoping for strong sales. Pork cutouts totaled 261.33 loads with 225.44 loads of pork cuts and 35.89 loads of trim. Pork cutout values: up $1.75, $122.09. Wednesday's slaughter is estimated at 474,000 head, 7,000 head more than a week ago and 2,00 head more than year ago. Tuesday's slaughter was revised to 469,000 head, 5,000 head less than what was originally stated. The CME Lean Hog Index for July 19: up $0.07, $112.33.
THURSDAY'S CASH HOG CALL: Steady. As we saw in Wednesday's cash hog market, packers largely have their nearby needs met and aren't willing to chase hogs throughout the countryside just for the fun of it.
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