GENERAL COMMENTS:
August feeder cattle are trading lower at midday Wednesday, but remain in a sideways trading range while October live cattle are modestly lower. October lean hog futures continue to extend their highest prices in a month with support from higher pork cutouts.
LIVE CATTLE:
October live cattle futures are trading up $0.65 at $185.47, down a little from their highest prices in four months and backing down from challenging the highest October prices on record. The market will need a strong reason to keep going higher from here and one of the arguments is that even at this level, futures prices are $7 below the price of live steers in the five-state area. Arguing a more cautious future, there is reason to expect seasonal pressure toward fall, the slaughter pace has slowed and boxed beef prices may have seen their peak for the year. Limited trade was reported in Kansas at $187 Tuesday, but it may not be indicative of how prices will look later this week.
In the bigger picture, retail beef demand remains in good shape, but the seasonal trend appears to have peaked. USDA's report on Wednesday morning showed choice boxed beef up $0.09 at $313.30 and selects down $1.65 at $295.01 with 125 total loads. Cattle slaughter in 2024 is down 4.5% from a year ago, the result of fewer cattle available. The slaughter pace was active until recently, but has now slowed. The first two days of this week show 238,000 head slaughtered, slightly below last week's pace that only saw 584,000 slaughtered. Dow Jones estimated cattle slaughter at 122,000 for Wednesday, up from 121,000 a week ago.
Friday morning's radar is mostly clear with hot temperatures expected to stress livestock in the western Plains the next couple weeks or more. Overall pasture conditions are better in the western Plains than a year ago so some herd expansion is possible this year, but to date there have been there have been no strong signs of heifer retention.
FEEDER CATTLE:
August feeder cattle are trading down $2.00 at $256.75, staying within the confines of a symmetrical triangle formation that goes back to September 2023. Technically speaking, a breakout above $264.00 or below $253.00 would suggest the emergence of a new trend in the same direction. Fundamentally speaking, the August futures price is near the CME Feeder Index at $256.67 and appears to be struggling to go much higher, unable to show the same bullish enthusiasm we saw earlier this year.
As mentioned above, better pasture conditions in the western Plains and cheaper hay prices are supporting this year's calf crop, but USDA's latest on-feed report showed no significant drop in the number of heifers put on feed.
LEAN HOGS:
October lean hogs are trading up $0.52 at $77.65, continuing to push higher after reversing direction earlier this month. It is interesting how this month's bullish reversal of direction closely matches the sharp upturn seen in May 2023, the last time October prices tried to trade below $70.00. The odd thing about this month's reversal is that we still see national negotiated hog prices at $84.74 Wednesday morning, trading below formula prices at $90.39. Both prices, however, are higher this week, while demand is being helped by the highest cutout prices since August 2023, quoted at $103.71 on Wednesday morning on 152.23 loads. Higher prices of loins and bellies were offsetting lower prices of ribs and hams. Also reflecting firm cash prices, the CME Lean Hog Index was projected at $90.08 for Monday, up $1.46 from a week ago.
So far in 2024, hog slaughter is up 1% from a year ago, keeping a fairly consistent pace. So far this week, slaughter totaled 934,000, down from 955,000 last week. For Wednesday, Dow Jones' estimated hog slaughter at 482,000, up from 478,000 a week ago.
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