GENERAL COMMENTS:
Cattle futures closed lower Monday afternoon after hovering within a sideways trading range on either side of unchanged through most of the session. Limited trade activity seen in both live cattle and feeder cattle futures sparked uncertainty but potential hope, as cattle traders balanced early gains in beef values with aggressive losses in nearby hog markets. The focus on underlying meat values over the next several days will continue to be a major factor in the ability to bring buyers back to the table through the rest of the week. Lean hog futures posted aggressive triple-digit losses, as October contracts closed limit lower based on concerns that further erosion in pork prices will lead to additional liquidation. Hog prices closed lower on the National Direct Afternoon Hog Report in light to moderate trade, down $0.09 with a weighted average of $99.06 on 4,055 head. December corn is down 2 3/4 cents per bushel and December soybean meal is up $1.80 per ton. The Dow Jones Industrial Average is down 107 points and NASDAQ is up 24 points.
LIVE CATTLE:
August live cattle futures remained unchanged, as traders are unlikely to see significant shifts in the front-month contracts given that this contract remains well aligned with cash market prices. Steady pressure in fall and winter contracts added to the concern that beef values may not be able to hold the aggressive trend higher following the end of summer buying demand. The concern that boxed beef values will quickly revert lower as Labor Day approaches and traders look for more normal beef demand movement through the fall and winter. This could add some additional price shifts, but so far prices appear to remain rangebound within a sideways pattern. August live cattle closed steady at $123.00, October live cattle closed $0.40 lower at $127.47 and December live cattle closed $0.42 lower at $132.90. Cash cattle activity remains undeveloped, which is typical for a Monday. The hope is that, with limited trade last week, packers would need to quickly step into the market to gain access to more cattle. The week is still young and packers could make an aggressive move over the next couple of days, but the safer bet would be that packers would try to limp along until the end of the week despite being short bought in order to focus on steady prices. Although asking prices are not fully developed, it is expected that feedlot managers will price cattle firmly higher given the aggressive moves in beef values and potential to take advantage of last week's modest moves higher.
Monday's slaughter is estimated at 119,000 head -- 3,000 head more than a week ago and 6,000 head more than a year ago.
Boxed beef prices closed higher: choice up $3.54 ($299.80) and select up $3.72 ($280.81) with a movement of 104 loads (54.51 loads of choice, 15.74 loads of select, 19.48 loads of trim and 14.08 loads of ground beef).
TUESDAY'S CASH CATTLE CALL: Steady. Bids and asking prices are still hard to pin down. Given the lighter trade last week, the potential that early week packer interest exists, but packers are no stranger to being short bought for the week and may be willing to hold out until the last half of the week in order to delay spending more money to access cattle over the next couple of weeks.
FEEDER CATTLE:
Feeder cattle futures trickled lower Monday with lightly traded August futures posting the majority of downward price moves, while narrow shifts were seen in the rest of the complex. Given the strong rally seen Friday, the ability to hold onto most of these gains, given the uncertainty in the rest of livestock and grain markets, seemed to give underlying support to the complex. September futures are still nearly $2 per cwt under July highs, but the ability to hold recent gains above $161 per cwt is expected to spark renewed support. August feeders closed $0.55 lower at $159.30 September feeders closed $0.12 lower at $163.20 and October feeders closed $0.07 lower at $165.70. Feeder cattle sales in Joplin Missouri reported moderate supply and demand with steers under 700 pounds averaging $2 to $4 per cwt lower than last week, while steers over 700 pounds are steady to $3 per cwt higher Heifers are listed steady to $4 per cwt higher. Oklahoma City posted moderate to good demand with prices generally steady with last week price levels. The CME Feeder Cattle Index for Aug. 6: down $0.25, $156.30.
LEAN HOGS:
Recent softness in pork cutout values have quickly rattled the complex with October lean hog futures closing $3 per cwt lower Monday. This limit-move lower not only is the second limit loss in three consecutive trading sessions, it also puts summer lows of $83 per cwt set in June as a strong possibility to be broken given the bearish tone of the market. Lean hog futures will be allowed to trade within expanded trading limits Tuesday, as these limits are set at $4.50 per cwt. The overall concern that further late summer and fall weakness in pork values could add even more trader liquidation during the upcoming days. August lean hogs closed $0.15 higher at $108.90, October lean hogs closed $3 lower at $84.60 and December lean hogs closed $2.97 lower at $78.77. Pork prices inched higher once again. Moderate to strong gains in ham and belly cuts were offset by active pressure in loin, butt and picnic cuts. The overall demand for pork both in domestic and export markets is growing more uncertain as traders look past summer demand and potential transportation and production challenges brought about by renewed COVID-19 restrictions. Pork cutouts totaled 353.19 loads with 321.69 loads of pork cutouts and 30.50 loads of trim. Pork cutout values: up $0.57, $124.24. Monday's slaughter is estimated at 456,000 head -- 48,000 head above a week ago and 2,000 head less than year ago. The CME Lean Hog Index for Aug. 6: down $0.84, $111.21.
TUESDAY'S CASH HOG CALL: Steady to $1 Lower. Underlying pressure in futures trade, combined with further concerns of additional weakness in pork cutout values, is expected to further reduce cash hog bids Tuesday morning. Packers are expected to maintain active plant speeds, and lower cash prices are not expected to limit procurement rates at this point.
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