GENERAL COMMENTS:
It was a tremendous day for the cattle contracts as the market saw ample technical support, and with cash cattle trading at steady money as opposed to weaker prices, the market's tone shifted. The lean hog market wasn't able to capture the same type of gains, but it hopes that Thursday's export report unveils something favorable. Hog prices closed higher on the Daily Direct Afternoon Hog Report, up $9.31 with a weighted average of $130.64 on 34.710 head. December corn is up 2 cents per bushel and December soybean meal is down $5.00. The Dow Jones Industrial Average is up 416.33 points.
LIVE CATTLE:
Wednesday's market was just what the cattle complex needed to see, serving as a reminder that bullish things are to come in the future as the market continues to trudge through the dog days of summer. The problem with putting too much faith in the future and on what "should happen," is that there's always the possibility that the market's environment changes and that the fruit of the market never comes to ripen. As cattlemen look at higher interest rates and blistering hot days in some parts, it's easy to get one-track minded and swelter on what currently is. But, as I said, Wednesday's market was the banner of hope that cattlemen needed. After weeks of lower cash cattle trade and on lousy volumes, Wednesday's market saw cattle trade for steady, which indicates that packers are in need of cattle. It undoubtedly helped that, not only did the board trade higher, but it traded significantly higher in the 2022 and early 2023 contracts. Steady money isn't where the market wants to hang its hat, and thankfully there are still feedlot owners/managers who remember the days when live cattle were trading for $170, but an unforeseen change in the market's current trading behavior has a way of waking feedlots up and reminding them that they can bat for more.
August live cattle closed $1.32 higher at $137.90, October live cattle closed $1.82 higher at $143.95 and December live cattle closed $1.67 higher at $149.95. When looking at the two heaviest traded contracts right now, October 2022 and December 2022, it was exhilarating to see that Wednesday's close pushed the market to somewhat break out of its sideways trading range. For the October 2022 contract, the market closed at its highest point since the end of April, and the December contract closed at its highest point since early May. There was some light trade that took place in the South at $135 which is fully steady with last week's business and some Northern trade that developed for $225 which is also steady with last week's market. Seeing steady trade in the cash market during the first week of August is extremely telling that packers may not be as bought up as thought and that supplies could be getting cleaned up.
Wednesday's slaughter is estimated at 124,000 head, 1,000 head less than a week ago and 2,000 head more than a year ago.
Boxed beef prices closed lower: choice down $0.52 ($267.94) and select down $0.25 ($241.30) with a movement of 106 loads (48.69 loads of choice, 18.25 loads of select, 22.70 loads of trim and 16.07 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Steady. Unless packers are desperately thin bought, prices will likely hold steady with the week's trend.
FEEDER CATTLE:
Early this week I was wrapping up the final touches to my column when I was left with the final question of: Who sits in the driver seat of this fall's feeder cattle market? You, the live cattle market or corn? In my concluding thoughts, I shared that the feeder cattle market had carried its own weight and performed extremely well since the beginning sales early this summer, and that corn prices have mainly regressed since May, which means that the lacking and unsupportive piece of the feeder cattle market has been the live cattle trade. Thankfully, Wednesday's market was a bit of a changing point as cash cattle traded steady (yes, I know steady isn't $10.00 higher, but a wrinkle in the descend is helpful) and the futures complex closed higher. August feeders closed $1.22 higher at $179.35, September feeders closed $1.45 higher at $182.90 and October feeders closed $1.50 higher at $185.70. Combine the technical support that the market saw with the continued buying demand that the countryside has seen, and the market sits prime to push higher if support sticks around. The CME Feeder Cattle Index for Aug. 2: down $0.36, $174.04.
LEAN HOGS:
Even though Wednesday had a big volume day in the cash hog market, the fact that pork cutout values closed over $5.00 lower really put a damper on the market's upside potential. October lean hogs closed $0.37 lower at $95.85, December lean hogs closed $0.35 lower at $87.40 and February lean hogs closed $0.47 lower at $90.47. The big drop in pork cutouts values came from the $26.21 reduction in belly cuts, as otherwise the market saw minimal losses. Pork cutouts total 254.18 loads with 223.24 loads of pork cuts and 30.95 loads of trim. Pork cutout values: down $5.53, $125.49. Wednesday's slaughter is estimated at 469,000 head, 1,000 head more than a week ago and 3,000 head less than a year ago. The CME Lean Hog Index for Aug. 1: down $0.30, $121.57.
THURSDAY'S CASH HOG CALL: Lower. Given that the market had such a big cash trade in Wednesday's market, it's likely that Thursday sees a smaller volume traded, and for weaker money.
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