GENERAL COMMENTS:
The livestock complex has found some of the fundamental support it was looking for throughout Monday. Corn prices are trending lower, the cash hog market is seeing great interest, and Tuesday's WASDE report was quite bullish for the cattle market. December corn is down 23 1/4 cents per bushel and December soybean meal is down $4.50. The Dow Jones Industrial Average is up 66.45 points.
LIVE CATTLE:
Before feedlots throw in the towel on this week's market and the opportunity to push cash cattle prices higher, I hope they look at market developments because optimism is brewing. First, Tuesday's WASDE report was very supportive of the live cattle market for both the immediate time being and the 2023 market. Secondly, boxed beef prices are printing higher prices again Tuesday and are constantly showing that beef demand is seeing stable interest. Thirdly, the board is showing gains in nearby contracts which is imperative to support the cash cattle market's ability to rally. August live cattle are up $0.60 at $136.75, October live cattle are up $0.62 at $141.05 and December live cattle are up $0.45 at $146.95. The cash cattle market hasn't really seen any trade develop and it's looking like business could wait until Wednesday or later to really develop. A bid of $145 is being offered in Nebraska, but otherwise the market is sitting idle, waiting for more aggressive money to be offered.
Tuesday's WASDE report shared supportive news for the cattle and beef markets. Beef production is raised for the second half with lower expected carcass weights and lower third quarter slaughter is more than offset by higher fourth-quarter slaughter. Beef production in 2022 grew by 15 million pounds from June's report to total 27,922,000 pounds. The beef production forecast was lowered slightly in anticipation of lighter carcass weights in 2023, but the industry will know more next month as by then it will have seen USDA's July Cattle Inventory Report which will be released July 22. Beef production in 2023 is anticipated to total 25,940,000 pounds. Quarterly prices didn't change much for 2022, other than in the second and third quarters where gains were noted. Second quarter's average price jumped $1.93 from last month to average $141.93, and the third quarter's average price jumped to $139.00, $3.00 higher than June's report. Beef import forecasts for 2022 and 2023 are unchanged from last month while the export forecasts are raised for both years on firm international demand. Beef exports for 2022 grew by 75 million pounds and beef exports for 2023 grew by 40 million pounds.
Boxed beef prices are higher: choice up $0.78 ($268.92) and select up $0.96 ($243.96) with a movement of 84 loads (46.27 loads of choice, 21.31 loads of select, 5.40 loads of trim and 11.49 loads of ground beef).
FEEDER CATTLE:
As the corn market dives lower thanks to worrisome concerns about weather and long-term fears about grain demand as COVID cases increase in China, the grain market's weakness comes at a perfect for the feeder cattle market as it was waiting patiently for its time to shine and for its opportunity to trade higher. August feeders are up $3.00 at $177.87, September feeders are up $2.70 at $180.07 and October feeders are up $2.22 at $182.10. As the market rallies to prices not seen since early April, cow-calf producers are hoping this momentum carries on throughout the rest of the week and helps ignite strong demand in sales. Monday afternoon the CME Feeder Cattle Index jumped to $172.21 -- a price point that's not been seen since 2015.
LEAN HOGS:
The lean hog contracts are seeing mild gains in the market's nearby months while the deferred months trade slightly lower. August lean hogs are up $0.25 at $108.57, October lean hogs are up $0.57 at $93.02 and December lean hogs are up $0.52 at $85.17. Helping the market trade slightly higher is the fundamental support which Monday's market lacked. Both cash prices and pork cutout values are higher, which should give the market the go-ahead to support higher trade technically. The problem is that it may not be enough encouragement, or enough support, to push the market past resistance at $110.00.
The projected CME Lean Hog Index for 7/11/2022 is up $0.79 at $112.56, and the actual index for 7/8/2022 is up $0.81 at $111.77. Hog prices are higher on the Daily Direct Morning Hog Report, up $7.70 with a weighted average of $121.77, ranging from $110.00 to $125.00 on 18,493 head and a five-day rolling average of $120.20. Pork cutouts total 173.82 loads with 159.58 loads of pork cuts and 14.24 loads of trim. Pork cutout values: up $1.50, $116.57.
Tuesday's WASDE report comes as a mixed bag for the hog market. Pork production is lowered on a slower-than-expected pace of slaughter in June and lower expected second-half carcass weights. Pork production in 2022 fell by 60 million pounds from June's forecast to 27,159,000 pounds. Pork production is raised based on 2022 second-half farrowing intentions reported in USDA's Quarterly Hogs and Pigs report, and expectations that farrowings in the first half of 2023 will be modestly higher. Pork production in 2023 grew by 155 million pounds from last month to 27,365,000 pounds. The second quarter is the only quarter in 2022 that changed from June's report, and it grew by $0.58 to average $75.58. Pork import forecasts are raised for both 2022 and 2023 on the current pace of trade and firm U.S. demand. Pork imports in 2022 grew by 110 million pounds from a month ago and 2023 pork imports grew by 185 million pounds.
Exports are reduced for 2022 but expected strength in foreign demand early in 2023 supports a slight increase in exports for that year. Pork exports in 2022 fell by 45 million pounds, but 2023 pork exports grew by 5 million pounds.
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