GENERAL COMMENTS:
Heading into Monday's market, the big question will be: which USDA report are the cattle contracts going to focus on? The Cattle on Feed report was somewhat bearish with its larger-than-expected placements, but the Cattle Inventory report was bullish with the market possessing the fewest beef cows it's had since 2014. Hog prices closed lower on the Daily Direct Afternoon Hog Report, down $6.23 with a weighted average of $118.48 on 4,266 head. December corn is down 9 1/4 cents per bushel and December soybean meal is down $3.20. The Dow Jones Industrial Average is down 137.61 points.
From Friday to Friday livestock futures scored the following changes: August live cattle up $2.45, October live cattle up $3.45; August feeder cattle up $5.20, September feeders up $4.80; August lean hogs up $8.88, October lean hogs up $3.73; September corn down $0.40, December corn down $0.40.
LIVE CATTLE:
The live cattle contracts rallied ahead of the day's close as the market anxiously awaited the two big USDA reports. The Cattle on Feed report was a disappointment as showed greater numbers than expected, but the Cattle Inventory report came in supportive of a stronger cattle market as the nation's beef cow herd numbers are the lowest they've been since 2014. The markets could be finicky come Monday as it's a coin toss on which report traders will focus on. However, long term, the market remains bullish. August live cattle closed $1.65 higher at $137.37, October live cattle closed $2.02 higher at $143.00 and December live cattle closed $1.85 higher at $148.17. The cash cattle market didn't see much support through Friday's market and, unfortunately, this week serves as the third consecutive week when packers have been able to push prices lower and only buy thin volumes throughout the cash market. With packers having the ability to buy and commit cattle months in advance through alternative marketing arrangements and formula deals, their need to support the cash market when cattle are abundant is thin to none. Nevertheless, throughout the week Southern live deals were marked at mostly $136, roughly $0.50 lower than last week's weighted averages. While Northern dressed business came in at mostly $227, $2 lower than last week's weighted average basis Nebraska.
Friday's slaughter is estimated at 119,000 head, 1,000 head less than a week ago and 7,000 head more than a year ago. Saturday's slaughter is projected at 49,000 head. This week's slaughter is estimated at 665,000 head, 9,000 head less than a week ago and 10,000 head more than a year ago.
Friday's Cold Storage report shared that total red meat supplies in freezer were down 1% from the previous month but up 24% from last year. Total pounds of beef in freezers were down 2% from last month but up 29% from a year ago.
Boxed beef prices closed mixed: choice down $0.64 ($267.12) and select up $1.97 ($242.50) with a movement of 95 loads (56.07 loads of choice, 14.39 loads of select, 12.54 loads of trim and 11.91 loads of ground beef). Throughout the week choice cuts averaged $269.70 (up $1.43 from last week) and select cuts averaged $242.33 (up $0.31 from last week) with the week's total movement of cuts, grinds and trim totaling 517 loads.
MONDAY'S CASH CATTLE CALL: Lower. Given that packers have ample supplies of cattle committed to them through other arrangements, their need to support the cash market right now is thin with supplies of cattle abundant.
FEEDER CATTLE:
The feeder cattle complex rounded out Friday's market on a substantially higher note as the market anticipated a supportive Cattle on Feed and Cattle Inventory report. The Cattle Inventory report was supportive as it showed fewer beef cows in the market, fewer replacement heifers in the market and a smaller calf crop for the year, but Friday's goodness stopped there as the Cattle on Feed Report stung like a bee. When analyzing these USDA reports it's important to remember that the market will react hastily if the USDA actual figures vary much from analysts' average estimate, which is where the problem with Friday's COF report stems from. Analysts projected that placements would be down around 94.3% of a year ago, but Friday's data depicted that placements were actually 98% of a year ago. Unfortunately, this unexpected hike in placements will likely suck some of the wind out of the feeder cattle market's sail, but it won't erode all the market's bullish energy as it's stemming from multiple sources. Thankfully, feeder cattle demand throughout the countryside remains incredible as buyers continue to realize that the market is going to be thin on supplies in the months to come. Additionally, it helps that trader are helping push this bullish move as Friday's market closed above the market's recent high and is equivalent to prices not last seen since late March. Nevertheless, there's a chance that the market fixates its attention on the unexpected jump in placements, but, long term, the market's outlook is still bullish. August feeders closed $3.27 higher at $181.55, September feeders closed $3.17 higher at $184.47 and October feeders closed $2.77 higher at $187.00. The CME Feeder Cattle Index for July 21: up $0.34, $171.01.
LEAN HOGS:
The lean hog market rounded out Friday's close with a stronger tone as the market accelerated technically and even captured higher pork cutout prices ahead of the weekend. August lean hogs closed $2.40 higher at $118.70, October lean hogs closed $0.55 higher at $96.32 and December lean hogs closed $0.30 higher at $86.52. Heading into next week's trade, the market will again rely on and look for follow-through support from consumers to sustain the complex. If interest holds and demand continues to keep pork prices at least steady, the market could continue to trend at these levels. However, if packers sense that demand is waning, the market likely won't see aggressive interest and the futures market could show hesitancy. Pork cutouts total 239.50 loads with 212.01 loads of pork cuts and 27.50 loads of trim. Pork cutout values: up $1.84, $125.74. Friday's slaughter is estimated at 435,000 head, 1,000 head less than a week ago and 5,000 head more than a year ago. Saturday's slaughter is projected to be around 41,000 head. Thursday's slaughter was revised to 441,000 head, 13,000 head more than what was originally stated. August lean hogs closed $2.40 higher at $118.70, October lean hogs closed $0.55 higher at $96.32 and December lean hogs closed $0.30 higher at $86.52. The CME Lean Hog Index for July 20: up $0.67, $117.04.
Friday's Cold Storage Report shared that frozen pork supplies were down 1% from last month, but up 22% from last year. Stocks of pork bellies were down 6% from last month but up 46% from last year.
MONDAY'S CASH HOG CALL: Steady. Packers won't likely be aggressive buyers in Monday's market as they'll feel the market out to see how demand interest seems before jumping into the cash market, which will likely demand strong prices again next week.
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