GENERAL COMMENTS:
Short-covering seems to be the focus in cattle and hog futures Wednesday morning as traders try to assess longer-term market direction and react to the aggressive triple-digit losses of Tuesday. Concern of further market pressure in live cattle and feeder cattle trade over the coming weeks could limit active buyer interest in most contract months. Hog futures have posted the strongest midweek price rebound with October and December contracts trying to regain early week losses with prices as much as $1 per cwt higher at midday. December corn is up 1 3/4 cent per bushel and December soybean meal is down $0.70 per ton. The Dow Jones Industrial Average is down 73 points.
LIVE CATTLE:
Despite light to moderate support in spot month contracts, live cattle futures have not found a convincing answer to the sharp losses that developed over the last two weeks. The tone across live cattle futures remains extremely weak with prices in October and December contracts moving to three-month lows. Even light to moderate support in cash cattle trade may not be able to rekindle buyer support in nearby or deferred futures contracts as traders are fearful of further widespread pressure in beef values in the near future. This could add further market softness to the entire complex as traders focus on a combination of outside market shifts and beef market fundamentals through the month of September. Cash cattle trade started to slowly trickle in Wednesday morning with a few deals in the South at $124 per cwt. Just a handful of trade is seen in the North at $203 per cwt dressed basis. At this point, prices are generally steady to $1 per cwt higher than last week's weighted average and could set the tone for further trade within the current price range over the next couple of days. It is thought packers will need to buy increased cattle numbers as reduced holiday-week procurements are behind us. This could cause more significant early week trade to develop over the next couple of weeks. Asking prices are listed at $125 to $126 per cwt live basis in the South with Northern asking prices still not well established. Feeders will continue to focus on finding support in cash markets given the discount to beef values, although the connection between beef prices and cash cattle trade is not expected to return to a normal pattern in the near future.
Wednesday morning's boxed beef prices are mixed in light trade, with choice cuts $0.59 higher at $335.78 and selects down $0.73 at $301.17 on a total count of 72 loads. Dow Jones estimated Wednesday's cattle slaughter at 121,000 -- steady with a week ago, and steady with year ago levels.
FEEDER CATTLE:
Traders are searching for market stability Wednesday morning as a portion of the bearish attitude seems to have subsided over the first couple hours of trade. Spot September contracts have been able to regain a small portion of early week losses with contracts hovering just below $157 per cwt, $0.70 per cwt higher. Feeder cattle trade has a long way to go to regain the losses of the last couple weeks. At this point, traders seem to be trying to find market stability rather than focus on any upside market support. The rest of the feeder cattle contracts have remained narrowly mixed through the morning with prices hovering from 20 cents lower to 15 cents higher. The inability to show significant support and regain a strong portion of sharp early week losses is likely to continue the weaker tone through the rest of the week. Narrow gains in corn prices through the morning also created concern that the previous grain market pressure may not hold, causing feeder cattle traders to focus on higher production costs. Last week's feeder cattle prices were listed as "unevenly steady" in the USDA national feeder cattle summary. Price levels were consistently priced $2 lower to $2 per higher with overall demand reported as moderate to good. Most of the activity done was early in the week as processing and shipping challenges can develop when scheduled around or over the long holiday weekend. With increased feeder calf runs expected in the upcoming weeks, it is likely some marketing has been put on pause, preparing for increased overall sales over the next two months. The CME Feeder Index was $157.37 for Sept. 6.
LEAN HOGS:
Moderate buyer support is steadily moving back into the lean hog futures complex Wednesday morning as traders seem to be uncertain about the legitimacy of early week losses. December contracts are leading the shift higher, holding $1 per cwt gains at midday, nearly offsetting Tuesday's losses. The separation of trade activity from the cattle market at midweek is helping the lean hog complex to become more stable, which is putting more focus on underlying pork market fundamentals. Pork demand is expected to remain strong from a domestic and export perspective and could further add longer-term market strength through the fourth quarter of 2021. Continued wide swings in a well-contained range in both cash hog prices and pork cutout values will continue to erode market confidence over the coming days and weeks. Cutouts are up $6.77 at $112.44 Wednesday morning on 290.73 loads. Negotiated hog prices are $1.94 higher per cwt with a weighted average price of $88.17 per cwt on 6,935 head on the National Direct Morning Hog Report. The swine/pork market formula price is listed at $95.79 per cwt. Dow Jones estimated Wednesday's hog slaughter at 480,000 -- 3,000 higher than a week ago, while 5,000 less than year ago levels. The CME Lean Hog Index is estimated at $98.74 for Sept. 7.
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