GENERAL COMMENTS:
Higher closes across the board for livestock futures contracts Wednesday suggest bullish traders have been heartened by the latest inflation numbers, which confirmed meat consumers have been willing to pay higher prices year over year. Cash cattle transactions got started just after noon on Wednesday, with a few dressed deals in Nebraska at $229, roughly $2 higher than last week's weighted average. Asking prices remain firm around $138 to $140 in the South, and $230 to $232 in the North. On the National Direct Afternoon Hog Report, negotiated prices were up $1.35 to a weighted average price of $132.48 on 25,266 head, and the 5-day rolling average was $129.56 per cwt. September corn moved up 5 3/4 cents per bushel to $6.21 1/4 and August soybean meal closed up $2 per ton to $515.60. The Dow Jones Industrial Average was up 515 points and the NASDAQ was up 364 points.
LIVE CATTLE:
Live cattle futures charts have been on a nearly uninterrupted upward trend since mid-July, and prices got another boost on Wednesday. The August contract closed $1.225 higher at $139.20, the October contract closed $1.30 higher at $144.475, and the December contract closed $1.05 higher at $150.70. Wednesday morning's CPI report showed beef prices are no longer one of the fastest contributors to overall inflation, with average year-over-year beef prices up only 3.4% and steaks actually falling 1.5% from July 2021 to July 2022. Grocery shoppers still love to buy ground beef, however, and overall demand should be seen as supportive, but only up to a point. When it comes to the supply and demand of marketable animals this week, however, it's a different story, and one where the buyers may be called upon to pay up. Light cash cattle trade is being reported in parts of the North with dressed deals marked at $229, roughly $2 higher than last week's weighted average. Asking prices remain firm around $138 to $140 in the South, and $230 to $232 in the North. It is possible that significant trade volume in the South could be delayed until late Wednesday afternoon and/or Thursday, since not even a token bid has been put on the table in that area. The Fed Cattle Exchange Auction held Wednesday reported seven lots, totaling 1,035 head of cattle, none of which sold. Opening Prices were at $134, reserve prices ranged from $136 to $138, with high bids ranging from $134 to $136.25.
Wednesday's slaughter totaled 126,000 head, 2,000 more than last week, and 10,000 greater than a year ago.
Boxed beef prices were lower Wednesday afternoon: choice down $1.51 ($264.73) and select down $1.16 ($237.70) with a movement of 154 loads (78.04 loads of choice, 30.65 loads of select, 12.13 loads of trim and 33.13 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: $1 to $2 higher than last week. With limited numbers of cattle ready to be marketed, the feedlots are in a position to use their leverage in the market.
FEEDER CATTLE:
On a day when nearby corn futures traded as much as 17 cents higher during the late morning, it was surprising to see the feeder cattle futures market's upward trend remain resilient, but traders have recognized the scarcity of animals is a problem that's not going to go away any time soon. The nearby August contract closed up $1.875 at $180.675, the September contract closed up $2.50 at $185, and the October contract closed up $1.60 at $187.175. Forecasts for another heatwave across the western Plains this weekend will exacerbate the ongoing drought and keep the market's attention on the pace of herd culling when there's no grass to feed mama cows. And it goes without saying that when there are fewer mama cows, there will be fewer calves in future breeding seasons. For the fall and winter ahead of us, however, the important October feeder cattle futures contract will have its sights on the $190-level, which it failed to breach back in February, but which it's within $3 of trying again later this week.
LEAN HOGS:
Pork buyers at the grocery store continue to demand product. Meanwhile, the processors meeting that demand are finding hog producers are pretty current with their supply of ready market-weight animals and in no panic to sell. It's therefore the nearby lean hog futures contracts that received the most bullish attention Wednesday. The August lean hog futures contract closed up $0.05 at $122.25, the October closed up $1.25 at $100.85, and the December closed up $0.375 at $89.975. Carcass weights have been slipping, particularly of producer-owned hogs (207-pound average last week), which is partly seasonal but probably also a reflection of the challenging input cost environment. The soybean meal market had a wild day Wednesday, with the continuous chart trading as high as $531.20 per ton and surpassing its mid-March high (but still below the 2012 all-time high of $554 per ton) before closing with more modest gains. Thursday afternoon pork cut-out report showed weakness in the rib primal, and the overall carcass value down $0.21 to $123.85. There were 321.32 total loads (305.70 loads of cuts and 15.62 loads of trim). The CME Lean Hog Index for Aug. 8: up $0.33, $122.25, and the projected Index for Aug. 9 is down $0.16, $122.09.
THURSDAY'S CASH HOG CALL: Steady to $1 higher. All of the forces that have lately tightened the supply of market-ready hogs remain in play.
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