GENERAL COMMENTS:
Any sense of market momentum earlier in the week seemed to be quickly offset as widespread pressure developed in the livestock markets Thursday. Lean hog futures took most of the heat, as October futures closed limit lower with $3 per cwt losses. With exception of soon to expire August lean hog futures, all contracts through August 2022 posted triple-digit losses. Triple-digit losses seen in all nearby live cattle and feeder cattle futures added further questions about the ability to spark a late week rally Friday, and uncertainty of cash market moves. Hog prices closed lower on the National Direct Afternoon Hog Report in light trade, down $2.75 with a weighted average of $99.91 on 4,631 head. December corn is up 6 cents per bushel and December soybean meal is up $3.30 per ton. The Dow Jones Industrial Average is up 199 points and NASDAQ is up 87 points.
LIVE CATTLE:
Despite a strong attempt for traders to hang onto previous gains, the mounting pressure of higher grain trade and aggressive limit losses in hog markets quickly eroded the resolve of live cattle traders, at least for the remainder of 2021 contract months. Deferred futures were lightly traded, but still were unable to gain needed market support to break away from lower closes by the end of the session. Even with the weaker price levels, markets remain unable to show technical pressure, continuing to trade within a sideways range. August live cattle closed $1.47 lower at $122.57, October live cattle closed 1.40 lower at $127.57 and December live cattle closed $1.17 lower at $132.77. Triple-digit gains in morning boxed beef values Thursday is offsetting futures market pressure when packers and feedlot managers focus on upcoming needed cash. Following light to moderate trade Wednesday, cash cattle markets remain generally quiet Thursday, and will likely push any additional trade needed into Friday. Bids are seen at $121 per cwt live basis in the South and $125 per cwt live basis in Iowa. This could spark renewed late week trade as asking prices remain firm at $123 in the South and $200 dressed in the North. Wednesday's trade of Northern live cattle selling at $125 per cwt, with dressed prices testing $198 per cwt and Southern trade at $121 to $122 per cwt seems to be the general bench market focused by feedlot managers heading into Friday. Trade less than $1 to $2 per cwt gains from last week will be viewed as disappointing at best.
Thursday's slaughter is estimated at 121,000 head, 2,000 head more than a week ago and 3,000 head more than a year ago. Week to date cattle slaughter is estimated at 480,000 head, which is 3,000 head above week ago levels and 14,000 head above year ago totals.
Boxed beef prices closed higher: choice up $3.24 ($292.58) and select up $2.62 ($273.77) with a movement of 107 loads (64.98 loads of choice, 20.54 loads of select, 9.49 loads of trim and 11.67 loads of ground beef).
FRIDAY'S CASH CATTLE CALL: Steady with Midweek trade. Limited bids are seen through the afternoon Thursday, leaving the indication that any additional needed trade will likely be pushed off until sometime Friday. With prices steady to $2 per cwt higher from week ago levels is setting the tone for market firmness despite the developing futures market pressure.
FEEDER CATTLE:
Feeder cattle futures fell victim to renewed buyer support in grain trade Thursday. Any expectations that weakness in corn and soybean markets earlier in the week would continue to help reduce overall feed costs were quickly dashed Thursday morning when active gains moved into nearby and deferred corn markets. This quickly pushed feeder cattle futures lower, creating additional short- and long-term uncertainty in the market as September contracts have now given back over $3 per cwt from summer highs posted last week. August feeders closed $1.55 lower at $157.65, September feeders closed $1.72 lower at $161.15 and October feeders closed $1.60 lower at $163.85. Firm underlying support is still expected to develop in cash feeder cattle prices through the upcoming days, as buyers seem aggressively searching for quality feeder cattle as late summer and full runs continue to develop. The CME Feeder Cattle Index for Aug. 4: down $0.17, $155.80.
LEAN HOGS:
October lean hog futures closed limit lower following a $3 per cwt loss Thursday as traders quickly became spooked by the recent tumble lower in pork cutout values and took protection through the Thursday trading session. Soon to expire August contracts gained back early losses to close unchanged, but this still did not rid the market of the bearish market tone following most nearby contracts trading at or near limit losses much of the session. Expanded trading limits will be available Friday across the lean hog complex with prices able to move $4.50 before trade is halted. This has the potential to add even more uncertainty to the complex heading into the weekend. August lean hogs closed steady at $109.47, October lean hogs closed $3 lower at $87.12 and December lean hogs closed $2.65 lower at $80.87. The midweek pressure in pork cutout values and uncertainty if pork prices can continue to regain short-term market support is adding increased volatility to the entire market. Pork cutouts totaled 257.02 loads with 239.32 loads of pork cutouts and 17.7 loads of trim. Pork cutout values: up $0.13, $123.12. Strong $10.33 gains in butt primal cuts were offset by a $10.54 per cwt loss in ham prices. Thursday's slaughter is estimated at 468,000 head, 6,000 head below a week ago and 12,000 head less than year ago. The CME Lean Hog Index for Aug. 4: up $0.70, $112.48.
FRIDAY'S CASH HOG CALL: Steady. Volatility in pork values and futures trade through the last half of the week is expected to limit upside potential of cash hog prices for Friday and Saturday procurement needs. Although given the current need for packers to gain access to hogs, cash market stability is likely over the next couple of days.
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