Monday Closing Livestock Market Update - Trade Leads to Early Week Losses

GENERAL COMMENTS:

Feeder cattle futures were the only livestock markets to show any sign of support Monday, as traders saw the strong market pullback in grain trade as a signal of lower feed and production costs. This weakness in grain markets will also have implications in hog and live cattle production costs, but the short-term moves seem to be focused on concern of overall pressure building in commodities in general. It is also likely that trade will remain sluggish through most of the week ahead of the long holiday weekend. Hog prices moved lower on the National Direct Afternoon Hog Report in moderate trade, fell $1.82 with a weighted average of $90.72 on 5,380 head. December corn is down 11 cents per bushel and December soybean meal is down $5.20 per ton. The Dow Jones Industrial Average is down 2 points and NASDAQ is up 154 points.

LIVE CATTLE:

Although August live cattle futures remain very lightly traded and not consistent with long-term market demand, the spot month futures tumbled lower as traders try to adjust positions before the expiration of the contact. October through April futures were more consistent with the overall tone of the market as prices fell 20 to 80 cents per cwt with very limited overall trade and lack of long-term direction Monday. Trade is likely to be sluggish through most of the week, although traders will closely follow the moves in both boxed beef trade and cash cattle markets, along with outside market commodities. The concern with sharply lower commodity markets Monday is that this overshadowing weakness may have a significant impact in nearby and deferred live cattle trade, further limiting fundamental traders from moving back into the complex. August live cattle closed $1.75 lower at $120.25, October live cattle closed $0.80 lower at $128.32, and December live cattle closed $0.65 at 134.67. Cash cattle activity remains undeveloped with asking prices and bids still hard to pin down. It is likely that trade will be seen before Friday as both sides are likely to want to wrap things up in front of the weekend. Showlists are generally mixed for the week, steady in Texas, higher in Kansas, and lower in Nebraska and Colorado.

Monday's slaughter is estimated at 117,000 head, 1,000 than a week ago and 2,000 head less than a year ago.

Boxed beef prices closed lower: choice down $2.56 ($342.78) and select down $2.97 ($312.55) with a movement of 86 loads (43.51 loads of choice, 15.67 loads of select, 15.59 loads of trim and 11.08 loads of ground beef).

TUESDAY'S CASH CATTLE CALL: Steady. Limited early interest is expected once again Tuesday morning. Although overall activity is likely to be accelerated from a normal week, most business is still likely to be seen Wednesday or Thursday.

FEEDER CATTLE:

Follow-through buyer support after Friday's shift higher has created spillover support through most nearby feeder cattle trade Monday. Traders focused on the sharp pullback in grain trade, which posted an 11-cent loss in December corn contracts and aggressive losses in soybean markets as signals of lower production costs. Although the overall softness in live cattle trade left most traders unwilling to aggressively step back into the market, "testing the waters" for higher gains early in the session allowed October through March contract to sustain further late day support. September feeders closed $0.60 lower at $164.05 October feeders closed $0.52 higher at $168.95 and November feeders closed $0.57 higher at $170.52. The CME Feeder Cattle Index for Aug. 27: $159.56, up 0.23.

LEAN HOGS:

Limited activity was seen through the lean hog complex Monday as traders slowly but steadily backed away from Friday's triple-digit gains. The overall focus on Monday's livestock trade was derailed by double-digit losses in corn markets and concern that overall weakness may continue to trickle into most commodity markets. Traders seemed to get very little encouragement from aggressive gains in the morning pork report, as futures traders have heavily discounted daily moves in both pork and cash hog price moves. Limited overall trade is likely to be seen through most of the week, although the light volume could leave prices to move in a wider shift without significant fundamental or technical justification. October lean hogs closed $0.57 lower at $90.15, December lean hogs closed $0.32 lower at $82.72, and February lean hog futures closed $0.57 lower at $83.75. Pork prices tumbled lower as strong pressure in ham and belly cuts developed. Pork cutouts totaled 271.26 loads with 232.74 loads of pork cutouts and 38.52 loads of trim. Pork cutout values: down $6.87, $109.72. Monday's slaughter is estimated at 477,000 head, 40,000 head above a week ago and up 2,000 from a year ago. The CME Lean Hog Index for Aug. 27: down $0.13, $103.49.

TUESDAY'S CASH HOG CALL: Steady. Limited overall cash market changes are expected to be seen Tuesday morning, although the back and forth shifts in average negotiated lean hog trade will likely keep markets fluid and packers and producers trying to hit a quickly moving, volatile target.