GENERAL COMMENTS:
Firm pressure redeveloped in lean hog futures Tuesday, causing concern of long-term support being broken. Despite the market weakness, widespread liquidation did not develop, keeping prices well within the current market range. Futures closed higher in both live cattle and feeder cattle trade. Live cattle buying slowly developed through the session, with the focus once again placed on aggressive boxed beef values in the Tuesday morning report. Feeder cattle prices have rebounded from early morning softness, although the inability to spark active buyer interest left prices with narrow to moderate gains in nearby contracts. Hog prices closed higher on the National Direct Afternoon Hog Report in light to moderate trade, up $0.14 with a weighted average of $99.20 on 5,289 head. December corn is down 1/2 cent per bushel and December soybean meal is steady. The Dow Jones Industrial Average is up 145 points and NASDAQ is down 68 points.
LIVE CATTLE:
Given the moderate missteps and price weakness last week in live cattle futures, light to moderate buying continues to slowly trickle into the market. Although the gains do not represent the surge in prices seen in boxed beef values, the focus on underlying market firmness over the last couple of weeks is helping to add support to the market. October futures moved above $128 per cwt once again, creating the potential and expectations that prices could move to or above short-term highs. The consistency of buying support in all nearby contract months is refreshing, as it points to a general consensus of market uniformity through the end of the year. August live cattle closed $0.65 higher at $123.65, October live cattle closed $0.65 higher at $128.12, and December live cattle closed $0.50 higher at $133.40. Cash cattle interest remains limited with packer bids still hard to pin down in all areas. Asking prices of feedlot managers are seen at $123 to $124 per cwt in the South, while Northern prices are still generally unavailable. It is expected that feedlots will remain aggressive when pricing cattle through the end of the week, given current support in futures trade and beef values, but trade may revert to a more normal schedule with activity delayed until Thursday or Friday.
Tuesday's slaughter is estimated at 120,000 head, 2,000 lower than a week ago and 2,000 head more than a year ago.
Boxed beef prices closed higher: choice up $5.52 ($305.32) and select up $3.80 ($284.61) with a movement of 128 loads (62.76 loads of choice, 17.09 loads of select, 14.22 loads of trim and 33.63 loads of ground beef).
WEDNESDAY'S CASH CATTLE CALL: Steady to $2 higher. Limited interest is seen across the cash cattle market at this point of the week, but feeders are expected to remain aggressively pricing cattle well into Friday given the sharp gains in beef values and underlying support in futures trade.
FEEDER CATTLE:
Feeder cattle futures made little headway Tuesday, with prices hovering in a mixed, but narrow trading range. September futures were the only contract to close with a loss for the day, although gains in other contracts were not significant until spring contracts. The limited moves in grain trade, combined with uncertainty if live cattle futures will be able to keep up with surging beef values is leaving most feeder cattle contracts willing to hover on the sidelines and wait until a later day before taking a position. August feeders closed $0.02 higher at $159.32 September feeders closed $0.15 lower at $163.05 and October feeders closed $0.15 higher at $165.85. Moderate to strong demand continues to be seen for light and heavy weight feeder cattle offered during early August. Prices are showing some volatility based on size of cattle sold and overall regional demand. As increased feeder cattle runs are expected in the coming weeks, the focus on long term supply and feed costs will continue to be significant factors in price levels. The CME Feeder Cattle Index for Aug. 9: up $0.03, $156.33.
LEAN HOGS:
Lean hog futures continue to test lower support levels as nearby futures traded more than $1 per cwt lower through most of the session. Thankfully, lean hog trade did not test extended trade limits following the limit moves Monday, but the lack of buying in the complex after the aggressive liquidation is still concerning. August futures closed higher as contracts will expire and settle to the CME Index at the end of the week. At this point, any trade in August contracts is positioning to this settlement price, but October through February futures are still showing market weakness as concern of further pork price support and market movement remains a big issue through late summer. August lean hogs closed $0.77 higher at $109.67, October lean hogs closed $0.72 lower at $83.87 and December lean hogs closed $1.25 lower at $77.52. Pork prices slid lower once again. The most significant pressure was seen in ham markets, and support seen during morning reports in belly cuts was unable to be sustained. Pork cutouts totaled 363.91 loads with 341.20 loads of pork cutouts and 22.70 loads of trim. Pork cutout values: down $1.84, $122.40. Tuesday's slaughter is estimated at 478,000 head, 9,000 head above a week ago and 18,000 head more than year ago. The CME Lean Hog Index for Aug. 9: down $0.44, $110.77.
WEDNESDAY'S CASH HOG CALL: Steady to $1 lower. Pressure is expected to continue in cash hog prices midweek with the growing pressure in futures trade and uncertainty about pork market stability.
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