GENERAL COMMENTS:
The daily back-and-forth market swings in cattle and hog futures are becoming very predictable through the month of August. The lack of ability to string two days of gains together is not only creating concern about follow-through support in the market, but is also keeping some traders out of the market. The strong surge in lean hog futures trade is led by spot month contracts, where gains of $2 per cwt are leading the market higher. Cattle futures are holding firm nearby gains, but the upcoming Cattle on Feed report is creating some uncertainty in the market. Expectations of lower placements and overall on feed numbers should help spark support, but trader interest is still uncertain. December corn is down 10 cents per bushel and December soybean meal is down $0.60 per ton. The Dow Jones Industrial Average is up 234 points.
LIVE CATTLE
Live cattle futures remain mixed in light to moderate trade Friday morning. Although there is very little activity in cash cattle markets, the underlying support in all livestock trade and strong upward moves in financial markets have gained the attention of most traders. August contracts are very lightly traded but are leading the complex higher with an 82-cent per cwt gain. Firm support in October futures is pushing price levels to $128.72 per cwt, as traders continue to look for additional support early next week after the Cattle on Feed report. The biggest question surrounding the afternoon report is just how much of the anticipated market support has already been priced into the complex. This will not be answered until Monday morning, but could lead to less volatility than some expect over the next couple of days. Cash cattle markets remain quiet through Friday morning. Although it is likely that some additional trade may still develop, it appears that, by the lack of active interest so far, the bulk of trade may already be done. Unless there is a significant shift from expected on feed numbers, cash prices on any additional trade will likely fall in line with previous sales for the week. Asking prices remain firm around $123 live and $202 and higher.
Friday's morning's boxed beef prices are higher once again with choice cuts up $3.14 at $344.77 and selects up $2.19 at $318.60 on a total count of 54 loads. Firm gains have continued to steadily develop in boxed beef values, although cash and futures prices are showing no sign of jumping onto the bandwagon. The concern that beef values will not be able to hold recent gains, as Labor Day buying ends, is still creating market apathy. Dow Jones estimated Friday's cattle slaughter at 117,000, 1,000 higher than a week ago.
FEEDER CATTLE
Feeder cattle futures have gained renewed support as traders continue to look toward the Cattle on Feed report Friday afternoon. It is expected that cattle placements in July will fall nearly 7% from year-ago levels, indicating additional tightness for cattle in the near future. The strong pullback in grain trade Friday morning has also sparked buyer support in nearby feeder cattle trade. Although Thursday's corn market losses did very little to support feeder cattle prices, the market slide over the past two days is creating significant shifts in production costs, if feeders are able to take advantage of forward pricing. September feeder cattle futures remains the focus of the complex with prices holding 90-cent gains and trading at $163.80 per cwt. These price levels put spot month futures within $1 per cwt of contract highs, causing some traders to anticipate further support next week. The CME Feeder Cattle Index was priced at $155.42 for Aug. 18.
LEAN HOGS
Aggressive gains have developed in nearby lean hog futures as traders bounce back from Thursday's losses. October futures are leading the market higher, posting gains of $2.67 per cwt at midday. The potential to hit limit gains of $3 per cwt is not out of the question, although there seems to be some uncertainty as to just how much follow-through support may develop in the last hour of trade. Triple-digit gains are seen in all nearby contracts as traders continue to test technical support combined with firming fundamental market strength at the end of the week. Pork primal prices have surged higher once again, driven by aggressive gains in ham and belly and rib cuts. Ham values increased $22.28 per cwt in the morning report. Cutouts are up $7.80 at $129.20 Friday morning on 206.16 loads. Negotiated hog prices are $1.85 per cwt lower with a weighted average price of $96.14 per cwt on 4,159 head on the National Direct Morning Hog Report. The swine/pork market formula price is listed at $106.91 per cwt. Dow Jones estimated Friday's hog slaughter at 471,000, 12,000 above a week ago, while 6,000 less than year-ago levels. The CME Lean Hog Index is estimated at $107.56 for Aug. 19.
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