GENERAL COMMENTS:
The best way to describe Wednesday's market is to say that it was odd. Grain prices closed dramatically lower and, instead of that fueling the livestock contracts to race even higher, traders jumped ship right ahead of the day's end and left the livestock contracts high and dry to close lower. Hog prices closed higher on the Daily Direct Afternoon Hog Report, up $0.37 with a weighted average price of $100.76 on 8,099 head. December corn is down 17 3/4 cents per bushel and December soybean meal is down $8.70. The Dow Jones Industrial Average is up 92.35 points.
LIVE CATTLE:
It wasn't the live cattle complex that chickened out of closing higher --instead, traders grew leery of the market's boldness. Earlier in the day, the live cattle complex was charging onward, once again pushing the spot August contract to new contract highs, but after the clock struck noon, traders grew skeptical as they watched grain prices plummet. This type of emotional reaction isn't surprising to see in a market that's this high as traders (and really all parties involved) are quick to jump and react to any movement, whether that be deemed fundamentally appropriate or not. August live cattle closed $1.95 lower at $176.87, October live cattle closed $1.45 lower at $180.25 and December live cattle closed $1.60 lower at $183.37. Steady to stronger trade isn't out of the question for the live cattle contracts come Thursday as, fundamentally, the market still sits in an incredibly strong position and Wednesday's lower move seems more emotionally driven than constructively rational. No cash cattle trade developed, but packer demand should increase come Thursday. Asking prices in the South are noted at $180 to $182 but are still unestablished in the North. Wednesday's slaughter is estimated at 127,000 head, 1,000 head less than a week ago and 1,000 head more than a year ago.
Wednesday's WASDE report painted a mostly supportive outlook for the cattle and beef markets through 2023. Beef production for 2023 was increased by 75 million pounds as fed cattle and non-fed cattle slaughter is more aggressive than originally anticipated. For 2024, beef production declined by 25 million pounds as more fed cattle marketings are expected to hit the market in late 2023 than in the first two quarters of 2024. Quarterly steer prices saw significant price increases from last month as the third quarter is now expected to average $178 (up $5.00 from last month) and the fourth quarter is estimated to average $183 (up $9.00 from last month). In 2024, first quarter steers prices are expected to average $186 (up $4.00 from last month, and the second quarter is expected to average $184. Beef imports for 2023 were increased by 20 million pounds, and exports fell by 10 million pounds. Meanwhile, in 2024, both beef imports and exports remained unchanged from a month ago.
Boxed beef prices closed mixed: choice down $1.14 ($310.98) and select up $0.86 ($281.10) with a movement of 165 loads (104.98 loads of choice, 33.96 loads of select, 10.98 loads of trim and 14.72 loads of ground beef).
THURSDAY'S CATTLE CALL: Steady. Feedlots obviously aren't interested in trading cattle if packers aren't willing to pay close to steady prices, which likely means that the market is going to trade steady if not a little higher.
FEEDER CATTLE:
One would think that, with the nearby corn contracts closing $0.18 to $0.22 lower, feeders would have soared and closed multiple dollars higher. But no, that wasn't the case in Wednesday's market. Even though feeder cattle prices continue to surpass expectations and demand continues to be utterly outstanding, the feeder cattle complex closed lower as, ultimately, traders grew sheepish ahead of Wednesday's end. August feeder cattle closed $0.57 lower at $246.57, September feeders closed $1.02 lower at $249.27 and October feeders closed $1.27 lower at $250.82. Sales were hot again Wednesday and I nearly spit my coffee out when I watched a set of steers at Bassett, Nebraska, weighing 635 pounds, bring $3.06. Feeder cattle sales are hot markets right now and the only softness that I've seen has been on unweaned calves selling at sale barns as buyers are more interested in calves/feeders that are going to undergo less stress. The CME Feeder Cattle Index for July 11: down $0.22, $238.11.
LEAN HOGS:
The lean hog complex began to trade lower right after the market unveiled Wednesday's WASDE report. The report shared mixed findings with higher quarterly prices and good export demand, but with production being cut back and the implications of Prop 12 still looming and creating greater market uncertainty, traders weren't comfortable trading the contracts higher anymore. August lean hogs closed $2.22 lower at $95.35, October lean hogs closed $0.80 lower at $82.17 and December lean hogs closed $1.25 lower at $75.12. It didn't help matters either that pork cutout values closed lower with big losses seen in multiple cuts. The butt fell $10.01, the belly fell $9.59 and the rib dropped $7.70. Pork cutouts totaled 228.75 loads with 193.91 loads of pork cuts and 34.84 loads of trim. Pork cutout values: down $1.33, $110.66. Wednesday's slaughter is estimated at 458,000 head, 18,000 head less than a week ago and 7,000 head more than a year ago. The CME Lean Hog Index for July 10: up $0.51, $98.66.
Wednesday's WASDE report shared a mixed outlook for the hog and pork markets. Pork production for 2023 fell by 5 million pounds from last month as slaughter in the second and third quarters of 2023 has been reduced. Pork production in 2024 saw a slight decrease as Prop 12 implications are expected to affect the marketplace. USDA WASDE report stated, "Pork production is reduced as producers indicated intentions to reduce farrowings in the second half of 2023 and lower farrowings are expected to continue in the first half of 2024. However, a more rapid rate of growth in pigs per litter is expected to partly offset the lower farrowings. Nonetheless, smaller-than-previously expected pig crops in late 2023 and early 2024 will result in a lower pork production forecast." Quarterly price projections for 2023 and 2024 were increased as supplies remain thin. For the third quarter of 2023, barrow and gilt prices are expected to average $63 (up $3.00 from last month), and fourth quarter prices are expected to average $57 (up $2.00 from last month). In 2024, barrows and gilts are expected to average $63.00 in the first quarter (up $3.00 from last month) and the second quarter is expected to average $68.00. For 2023 pork imports were increased by 5 million pounds, and pork exports were increased by 110 million pounds as demand continues to remain strong from China and Mexico especially. For 2024 pork imports are unchanged from last month, but exports for 2024 were increased by 160 million pounds.
THURSDAY'S HOG CALL: Lower. Given that packers have been moderately active already in this week's market likely means that they won't have to procure many more hogs come Thursday or Friday.
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