GENERAL COMMENTS:
August feeders and July lean hogs both finished higher Friday but were lower on the week. August live cattle struggled with another week of bird flu in the news and finished down 30 cents Friday.
LIVE CATTLE:
August live cattle tried to trade higher early but ended down $0.30 at $177.17 Friday and lost $1.27 on the week. Specs in live cattle remain bullish, holding 54,133 contracts net long as of June 4, but that was down from 60,855 the previous week. Traders remain skittish, continuing to face news about bird flu every week.
The good news for producers is that consumers haven't been skittish about buying beef. Choice boxed beef prices were up 54 cents at $316.75 Friday and were up $3.55 on the week. Selects were up 31 cents at $301.14 Friday but were down 57 cents on the week. Despite reports of bird flu infections found in dairy cattle in Iowa and Minnesota this week, boxed beef prices continue to indicate active levels of retail demand with choice prices at their highest level since August. Last week's cattle slaughter was estimated by USDA at 614,000, also an indication of good demand. After Friday's close, USDA estimated daily slaughter at 118,000, down from 122,000 last week.
As of the time of this writing, light trade was reported in the South at roughly $185 or $1 lower, while a few northern trades were reported at $301, roughly steady with last week. More will likely come later Friday afternoon.
MONDAY'S CATTLE CALL: Steady with firm support from higher cash prices.
FEEDER CATTLE:
August feeder cattle closed up $2.07 at $254.92 Friday, an unexpected end-of-week bounce that limited the weekly loss to $1.47. Friday's higher close will not be good news to the noncommercials in feeder cattle that just switched to being net short 1,925 contracts as of June 4.
Despite seven consecutive lower closes before Friday, the cash side of feeder prices has been holding firm. On Friday afternoon, the CME Feeder Index was quoted at $250.54 as of Wednesday, up $1.26 from a week ago and a little below Thursday's August close at $252.85.
In the bigger picture, it is impressive that August feeder prices have held roughly steady the past two months, while the country has witnessed a slow spread of bird flu infections in dairy cattle. To date, there is still no reason to believe either the milk supply or beef supply is unsafe, a credit to industry practices. While the market continues to learn more about the virus, the number of calves in the U.S. remains historically low, and more are needed. This spring's greener pastures will help, but it remains to be seen if much expansion will take place in 2024. Technically speaking, August feeder cattle remain in a sideways trading range with important support near $249.
LEAN HOGS:
July lean hogs traded lower most of the day, but closed up $0.52 at $93.50, finding a second day of support after reaching its lowest close in five months on Wednesday. The roughly $16.50 drop in July futures prices since late April has coincided with specs and managed futures funds bailing out of sizeable net long positions. Friday afternoon's CFTC data showed noncommercials in lean hogs were reduced from 13,662 to 5,546 as of June 4, another week of liquidation.
Despite this weakness in futures prices, the cash side of the market has held firm the past two months with some deterioration seen in negotiated bids. Friday's report from USDA showed national formula prices at $90.15, while national negotiated prices ended lower at $85.98 -- a possible sign packers are finding it easier to fill their weekly supply needs. On Friday afternoon, the CME's Lean Hog Index was projected at $91.75 as of Thursday, up 26 cents on the week.
Retail customers have been more generous this year, bidding up cutout values enough to keep slaughter active. Friday's USDA report, however, showed cutouts ended the week down $2.34 at $100.91. Pork bellies had quite a week and ended at $128.73. Late Friday, USDA estimated year-to-date hog slaughter was up 0.8% from a year ago. USDA estimated Friday's hog slaughter at 466,000, down from 483,000 a week ago. Technically speaking, July lean hogs remain in an active downtrend with possible support near $90, the lowest prices of 2024.
MONDAY'S HOG CALL: Steady to lower in July hogs with prices nearing their lowest levels in 2024.
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