GENERAL COMMENTS:
Lean hog futures became the bright spot of a pretty mundane and lackluster trading session Wednesday. The focus on increased pork prices in both the morning and afternoon report seemed to on renewed trade interest in October and December futures, which posted aggressive late-day gains. Cattle markets were less optimistic, as feeder futures got caught up in the renewed grain market support, and additional concerns of elevated feed and production costs put pressure on all contracts. Live cattle futures seem to be paying no attention to the surging boxed beef values as traders quickly backed away from previous gains seen Tuesday. Hog prices closed higher on the National Direct Afternoon Hog Report in moderate trade, up $0.41 with a weighted average of $99.61 on 7,420 head. December corn is up 6 cents per bushel and December soybean meal is down $3 per ton. The Dow Jones Industrial Average is up 220 points and NASDAQ is down 22 points.
LIVE CATTLE:
Live cattle futures turned lower in nearby contracts with Wednesday trade essentially giving back any support seen Tuesday. This created more concern throughout the complex even though overall trade volume remained generally sluggish through most of the session. The shift lower in feeder cattle and strong gains in grain markets continue to create questions of overall production costs. Even though beef values continue to be skyrocketing higher, most traders are turning a deaf ear to these moves as many feel that these gains are unsustainable long term and may quickly revert lower once needed Labor Day buying has finished. August live cattle closed $0.70 lower at $122.95, October live cattle closed $0.55 higher at $127.57 and December live cattle closed $0.22 lower at $133.17. Cash cattle trade slowly started to develop with sales in the South reported at $121 per cwt in Kansas and Texas. These prices are generally steady with last week's price levels. A few bids in Nebraska are seen at $124 live and $198 to $202 dressed, but so far feeders are unwilling to pull the trigger as prices are still below asking prices of $202 to $204 per cwt. Light trade in Iowa was reported sold at $126 live basis, but this is for later delivery during the week of Aug. 23. More active trade is expected to be seen Thursday or Friday in all areas. The Fed Cattle Exchange Auction today listed a total of 4,872 head, of which 590 actually sold, 143 were scratched from the auction and 4,139 head were listed as unsold as they did not meet the reserve prices that ranged from $122 to $124. Opening prices ranged from $120, high bids ranged from $120 to $121.75. The state-by-state breakdown looks like this: Texas 4,800 total head, with 590 head sold at $120 to $120.50, 4,067 head unsold and 143 were scratched from the auction; Kansas 72 total head, all of which went unsold.
Wednesday's slaughter is estimated at 120,000 head, 1,000 lower than a week ago and 3,000 head more than a year ago.
Boxed beef prices closed higher: choice up $5.48 ($310.80) and select up $3.38 ($287.99) with a movement of 110 loads (68.66 loads of choice, 19.46 loads of select, 9.91loads of trim and 12.09 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Steady. Light trade in the South Wednesday is generally steady with last week. Despite the surging boxed beef values, the underlying pressure packers seem to have and softness in futures trade could limit upward price movement Thursday.
FEEDER CATTLE:
Feeder cattle futures retracted Tuesday's market support as traders quickly focused on the underlying softness in live cattle futures and concern that the recent rebound in corn and grain prices may point to even more pressure in the feeder cattle complex. Most contracts posted 55-cent loses at closing bell, although the ability to hold above last week's lows is slightly encouraging at this point. August feeders closed $0.55 lower at $158.77 September feeders closed $0.22 lower at $162.82 and October feeders closed $0.55 lower at $165.30. Feeder cattle sold at the West Plains, Missouri, sale reported light weight steers $3 to $5 per cwt lower than last week, while light weight heifers are listed $2 lower to $2 higher. Yearling steers are listed steady to $3 per cwt higher from last week's average. The CME Feeder Cattle Index for Aug. 10: down $0.14, $156.19.
LEAN HOGS:
Lean hog futures quickly became the bright spot of the livestock complex Wednesday afternoon. Although the market still is far from out of the woods, and memories of limit losses are still fresh in producers and traders' minds, there are hints that pork prices may have hit bottom for the time being as buyers quickly stepped back into the market to re-own nearby contracts. Light trade was seen during much of the afternoon, but this allowed for October and December futures to post gains from $1 to nearly $2 per cwt higher before closing bell. The move away from short- and long-term support levels could quickly bring about renewed underlying buyer support at the end of the week. Traders will also closely monitor export sales reports and WASDE reports Thursday before actively stepping back into the market at the end of the week. August lean hogs closed $0.05 lower at $109.62, October lean hogs closed $1.97 higher at $85.85 and December lean hogs closed $1.37 higher at $78.90. Pork prices posted firm gains following aggressive gains in ham cuts. Although prices are showing signs of further support, the pullback from gains in the morning report does curb overall enthusiasm by many traders. Pork cutouts totaled 319.85 loads with 291.34 loads of pork cutouts and 28.51 loads of trim. Pork cutout values: up $1.56, $123.96. Wednesday's slaughter is estimated at 474,000 head, 2,000 head above a week ago and 6,000 head less than year ago. The CME Lean Hog Index for Aug. 10: down $0.32, $110.45.
THURSDAY'S CASH HOG CALL: Steady. The ability for futures trade and pork prices to move higher in the morning report is expected to bring about renewed interest in cash hog prices, with both sides looking for stability following the recent turn lower over the last week.
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