GENERAL COMMENTS:
Light to moderate gains slowly but steadily developed in live and feeder cattle futures Wednesday. Active pressure in most commodity markets and triple-digit losses in the Dow Jones Index left traders looking for a needed sense of stability in the cattle market. Hog futures closed mixed with spot contracts able to etch out a narrow gain based on recent market support, but the rest of the complex slid lower as global pressure left questions about short- and long-term pork demand. Hog prices closed higher on the National Direct Afternoon Hog Report, up $2.26 with a weighted average of $102.66 on 8,348 head. December corn is down 5 cents per bushel and December soybean meal is up $4.30 per ton. The Dow Jones Industrial Average is down 285 points and NASDAQ is up 24 points.
LIVE CATTLE:
Traders in live cattle futures continued to keep the ball rolling following recent upward market support in all nearby contracts. August futures moved above last week's highs, posting the highest closing price since mid-June. Questions still remain about the ability to maintain production support over the coming weeks and months. But given the pressure in outside markets, cattle markets have become one of the few bright spots for noncommercial traders. August live cattle closed $0.80 higher at $124.05, October live cattle closed $0.82 higher at $128.97 and December live cattle closed $0.75 higher at $133.95. Following additional underlying support moving into boxed beef trade on the morning report, increased momentum is seen in both futures and cash.
The Fed Cattle Exchange Auction on Wednesday listed a total of 6,078 head, of which 1,393 actually sold, and 4,685 head were listed as unsold, as they did not meet the reserve prices, which ranged from $118 to $123. Opening prices ranged from $118 to $119, high bids ranged from $118 to $122. The state-by-state breakdown looks like this: Texas 5,897 total head, with 1,393 head sold at $118 to $122, and 4,504 head went unsold; Kansas 181 total head, all of which went unsold.
Cash cattle trade is starting to be seen with Northern live cattle selling at $125 per cwt and dressed prices testing $198 per cwt. Limited Southern trade at $121 to $122 per cwt was noted through the afternoon. In general, most of these deals are $1 per cwt higher than last week's price levels. It is uncertain if more momentum will develop over the last two days of the week, or if the current price movement will shake enough cattle loose from feedlot owners' hands as they head into the heart of August.
Wednesday's slaughter is estimated at 121,000 head -- 1,000 head more than a week ago and 3,000 head more than a year ago. Week-to-date cattle slaughter is estimated at 359,000 head, which is 1,000 head above week ago levels and 13,000 head above year ago totals.
Boxed beef prices closed higher: choice up $3.50 ($289.34) and select up $3.66 ($271.15) with a movement of 146 loads (88.37 loads of choice, 18.74 loads of select, 19.37 loads of trim and 19.34 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Steady to $1 higher. Growing support in boxed beef values through the first half of the week, combined with moderate to active futures gains, is helping solidify feeders' asking prices going into Thursday and Friday. Trade as much as $1 per cwt higher Wednesday afternoon will likely further support feedlot managers resolve through the end of the week.
FEEDER CATTLE:
Feeder cattle futures trickled higher Wednesday as follow-through buying stepped into the market after previous gains earlier in the week. Even though higher prices are nothing to discount, the lack of aggressive buying in the feeder complex as corn prices continue to slip lower, and live cattle and boxed beef prices are still firming, is somewhat disappointing. But the hope is that follow-through buying will continue to develop through the end of the week, spurring more long-term support through the complex. August feeders closed $0.30 higher at $159.20, September feeders closed $0.35 higher at $162.87 and October feeders closed $0.40 higher at $165.45. Following strong feeder cattle sales earlier in the week with increased activity developing, the potential for increased underlying support over the next couple of weeks is creating some additional hope and expectations that further gains will develop in the days and weeks to come. The CME Feeder Cattle Index 8/3/2021: down $0.18, $155.97.
LEAN HOGS:
Pork cutout values posted aggressive weakness with overall carcass values falling $4.68 per cwt; all but belly primal cuts posted triple-digit losses. The combined concern of further softness in pork values over the coming days may add even more weakness to hog and pork values. This created weakness in most lean hog contracts as traders focus on taking protection given the separation in direction between cash and pork values, which may continue to leave market moves somewhat foggy in the near future. August lean hogs closed $0.40 higher at $109.47, October lean hogs closed $1.25 lower at $90.12 and December lean hogs closed $0.72 lower at $83.52. Growing concern surrounding additional numbers of Delta variant COVID cases, and the global impact on potential China demand, could continue to bring about increased uncertainty in lean hog futures prices over the next few days and weeks. Despite firm procurement levels, the growing concern of plant workers will continue to cast a shadow over the market in the near future. Pork cutouts totaled 340.73 loads with 314.94 loads of pork cutouts and 25.80 loads of trim. Pork cutout values: down $4.68, $122.99. Wednesday's slaughter is estimated at 472,000 head -- 7,000 head more than a week ago and 6,000 head less than year ago. The CME Lean Hog Index 8/3/2021: up $0.19, $111.78.
THURSDAY'S CASH HOG CALL: Steady. Despite recent pressure in lean hog futures, packer bids are expected to remain generally steady as they focus on maintaining procurement levels through the rest of the week.
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