GENERAL COMMENTS:
Feeder cattle prices are starting higher Friday, while lean hog futures remain near their lowest prices in five months, more in line with their firm cash market.
LIVE CATTLE:
August live cattle futures are trading up $0.12 at $177.60, struggling to build bullish momentum after more reports of bird flu infections in dairy cattle this week, this time in Iowa and Minnesota. A report from Mexico of a person dying after being infected with Avian H5N2 also added to this week's cautious tone in cattle prices. There continues to be no evidence to claim U.S. beef is unsafe, but traders remain leery about owning cattle futures.
For the most part, we do not see the same caution at retail outlets as consumers continue to buy beef. USDA's report on Friday morning showed choice boxed beef up $1.04 at $317.25 and selects up $0.54 at $301.37 with 76 loads. The slaughter pace has also been active this week and will likely be back above 600,000 after the Memorial Day dip. Dow Jones estimates cattle slaughter at 117,000 for Friday, even with a week ago.
Friday morning's radar is mostly clear with moderate showers expected in parts of Nebraska and northern Missouri. Temperatures in the 90s are expected in the southwestern Plains as far north as Kansas, but should moderate by Monday.
In outside markets, U.S. employment fell 408,000 in May, down from its recent historical peak to 161.08 million. The unemployment rate increased from 3.9% in April to 4.0% in May. However, the yield on 10-year T-Notes jumped up 13 basis points, trading at 4.41% Friday morning after non-farm payrolls came in higher than expected, at 272,000. The Federal Reserve's next interest rate decision is on Wednesday, June 12.
FEEDER CATTLE:
August feeder cattle are trading up $2.25 at $255.10, proposing to break its string of seven lower closes, while holding support above $249.05. For the most part, August feeder prices have stayed in a sideways trading range the past two months, biding time while the market learns more about the risks of the bird flu that has been slowing spreading through dairy cattle. The country continues to function with a historically low number of calves and the strain on packers has been more obvious in 2024, even with the recent distractions. After a wetter spring in the western Plains, pressures to liquidate cattle prematurely have eased and time will tell when or if expansion can take place. For now, feeder prices are likely to keep benefiting from low supplies and good demand.
On the cash side, the CME Feeder Index was priced at $250.54 as of Wednesday, up $1.26 on the week, even though futures prices have been under pressure. Technically speaking, August feeder cattle prices are below the 100-day average near $261, but are holding above important support near $249.
LEAN HOGS:
July lean hogs are trading down $0.42 at $92.55, on track for a lower weekly close with prices near their lowest level in five months. The July futures contract has experienced a bearish dive of roughly $17 since late April, but formula cash hog prices have stayed remarkably steady near $90, meaning the futures price has almost returned to the cash level. Also reflecting firm cash prices, the CME Lean Hog Index was projected at $91.92 for Wednesday, up $0.92 from a week ago.
There is a small bearish crack in the cash market starting to develop, however. Early Friday, USDA showed national negotiated cash hogs at $86.63, below the national swine formula price of $90.11. The discount in negotiated prices is an early sign packers are finding it easier to obtain weekly supplies. So far in 2024, the hog slaughter has been up slightly from a year ago, at a fairly consistent pace. For Friday, Dow Jones' estimated hog slaughter at 469,000, down from 482,000 a week ago.
Friday morning's report of pork cutout values jumped up $3.21 to $103.90, above the late-May peak of $103.25 and was helped by an $10.27 gain in the price of bellies, now up to $143.20. Technically speaking, July hog prices are trending down with possible support near or above the 2024 low of $89.87.
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