Thursday Morning Livestock Market Summary - Hog Traders Adjust For Upcoming Hogs and Pigs Report

General Comments:

Cash cattle trade became more active Wednesday afternoon with light to moderate activity seen in most areas. Trade in the South was reported at $95 to $97 per cwt live basis, generally $4 per cwt lower than last week's average, Trade across the North on a dressed basis was reported at $155 to $156 per cwt, steady to $1 higher than Tuesday's activity, but still about $5 per cwt lower than last week. The extremely wide basis premiums which we have talked about over the last three months have essentially evaporated with current cash prices eliminating a cash market premium. This brings the cash market into a more traditional level with August futures trade, but still does not bode well for market direction in the near future as the backlog of cattle still remains very evident in all sectors of the industry. Futures trade is expected to remain mixed Thursday morning. Although most of the report focus will be centered on the hogs and pigs report, the livestock slaughter report will help to confirm the increased overall movement of cattle through the month of May, leading to the current market situation. Thursday slaughter is expected at 121,000 head.

Lean hog futures are expected to trade under pressure most of the day Thursday as the main focus. As far as reports go, focus will be on the quarterly Hogs and Pigs report. This is likely to be the most anticipated hogs and pigs report in many years, as this will give the best indication of overall hog numbers following the coronavirus shutdown, as well as weight ranges of market hogs. Although overall hog numbers are expected to be seen larger than last year, the amount of hogs kept for breeding is expected to have fallen significantly, creating the expectation of tighter supplies during 2021. Generally market pressure is likely to be seen through most of the morning, although a bullish weekly export sales report and sales to China last week could help to calm the market weakness just a bit. Cash hog prices are expected $1 lower to 50 cents higher with most bids expected steady to weak. Slaughter Thursday is expected at 475,000 head. Saturday runs are expected at 309,000 head.

	BULL SIDE		BEAR SIDE
1)	Firm buyer support has developed in deferred feeder cattle contracts through the week. This has expanded the premium over spot month contracts to $3.40 per cwt as traders focus on tighter supplies through the end of the year.	1)	The strong basis levels in cash cattle market seen through most of the spring and early summer have evaporated following the aggressive tumble in cash market prices over the last month. This is likely to limit additional weakness through the entire complex through most of the summer.
2)	Continued pressure in wholesale beef values are expected to quickly be worked through the retail industry over the near future. This could help to stimulate additional retail demand and inventory building by consumers as they take advantage of the significantly lower prices.	2)	Spot live cattle futures are holding just slightly above technical support levels of $95.12 per cwt. Continued pressure through the rest of the week, testing these levels could signal a move to the low $90s creating additional long term pressure, especially given the weakness in beef values and cash markets.
3)	Expectations of long-term market support through late 2020 and early 2021 is likely to help build buyer support at current price levels.	3)	Increased hog numbers are expected to be seen in the afternoon hogs and pigs report. This is likely to keep markets under pressure through most of the morning.
4)	Significant changes are expected to be seen in hogs kept for breeding and adjustments made to farrowing intentions through the end of the year and early 2021. This is expected to show the indication of long-term bullishness based on a contracting pork production system due to current price levels.	4)	Uncertainty about developing trade and deliveries to China will be closely watched in the morning export sales report. Limited weekly sales to China could spark additional weakness in nearby futures trade during the morning.

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Wednesday Closing Livestock Market Summary - Thursday Will Be a Big Day for Livestock Markets

GENERAL COMMENTS:

There's a lot of pressure and anxiousness heading into Thursday, as the market will be tested with sales and updated on important data. Feeder cattle enthusiasts are going to be watching the specialty sales, and hog producers are going to be watching just as closely for the quarterly hogs and pigs report. Hog prices closed lower on the National Direct Afternoon Hog Report down $0.16 with a weighted average of $28.50 on 7,146 head. July corn is down 3/4 cent per bushel and July soybean meal is up $0.40. The Dow Jones Industrial Average is down 710.16 points and NASDAQ is down 222.20 points.

LIVE CATTLE:

Live cattle contracts tried to rally through parts of the day, but the pressure of the backlog of cattle and the weakening cash market aided in the market's decision to scale lower. August live cattle closed $0.85 lower at $96.35, October live cattle closed $0.25 lower at $99.62 and December live cattle closed $0.17 lower at $103.35. A light to moderate trade developed in several area with Northern dressed deals at $155 to $156, mostly $156, which is just under $5 lower than last week's weighted average in Nebraska. Southern live business was at $95 to $97, mostly $97, $4 lower than last week's weighted averages. Wednesday's slaughter is estimated at 120,000 head, steady with a week ago and 3,000 head less than a year ago.

USDA's Crop Progress report released June 22 shared that only 43% of the nation's pasture/range conditions were in good-to-excellent condition, while at this time last year good-to-excellent pasture/range conditions were upwards of 68%. Not to mention that some states had alarmingly higher poor-to-very-poor pasture/range conditions: 48% in Colorado, 55% in California, 59% in New Mexico and 31% in Texas. With this being only the first official week of summer, states with dwindling pasture and range conditions could be forced to liquidate some livestock.

Boxed beef prices closed lower: choice down $2.12 ($209.69) and select down $1.88 ($201.69) with a movement of 196 loads (110.69 loads of choice cuts, 31.60 loads of select, 14.78 loads of trim and 38.62 loads of ground beef).

THURSDAY'S CASH CATTLE CALL: Steady to slightly lower. This week hasn't thrown the cash cattle market any favors, and as the midweek point has already been reached, the market will most likely continue to trade in its already established ranges.

FEEDER CATTLE:

As Wednesday closes and all eyes begin to look to Thursday, feeder cattle participants have Thursday's sales on their mind. Northern Livestock Video Auction will be selling roughly 16,600 head and Superior Livestock Auction will be selling 44,900 head. Feeder cattle contracts closed the day mixed as, after the noon hour, some pressure grew in the nearby contracts. August feeders closed $0.32 lower at $132.87, September feeders closed $0.30 lower at $134.17 and October feeders closed $0.25 lower at $135.17. From November 2020 into 2021 the complex was able to close higher, which makes sense as there's so much discrepancy on how prices are going to fare over the next couple of months.

At Hub City Livestock Auction in Aberdeen, South Dakota, compared to last week, the best test through Wednesday's action for steers was those weighing 850 to 950 pounds which sold $1.00 to $4.00 stronger. The best test on heifers was of those weighing 800 to 850 pounds, which sold $2.00 to $3.00 higher. The CME feeder cattle index 6/23/2020: up $0.41, $129.12.

LEAN HOGS:

The lean hog complex didn't close with hardly any optimism, but rather smoked an entire pack of Marlboro Man cigarettes when they saw that analysts' projections for hogs weighing 180 pounds and over ranged anywhere from 102.2% to 126.8%, with an average of 116.6% higher than a year ago. Not only is the wide range bothersome (which is largely attributed to not knowing how many hogs were euthanized during COVID-19 and not knowing how many market-ready hogs are on maintaining rations), but the simple fact that the average projection is a staggering 16.6% higher than a year ago means that the backlog of hogs we have known about is far greater than most assumed. Pork cutouts totaled 411.28 loads with 353.07 loads of pork cuts and 58.21 loads of trim. Pork cutout values: up $4.50, $67.78. Wednesday's slaughter is estimated at 468,000 head, 8,000 head more than a week ago and 5,000 head less than a year ago. The CME lean hog index 6/22/2020: up $0.11, $45.17.

THURSDAY'S CASH HOG CALL: Lower. With pressure building on the complex, everyone is going to want to know how Thursday's report fares.

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Wednesday Midday Livestock Market Summary - Cattle Contracts Trade Mixed While Lean Hogs Tip Lower

General Comments

The livestock complex's rally didn't last very long as all three markets have lower trading contracts. But even though the cattle contracts have some resistance floating atop the marketplace, feeder cattle contracts, and some nearby live cattle contracts are willing to cautiously flirt with the idea of trading higher. July corn is up 1/2 cent per bushel and July soybean meal is up $0.70. The Dow Jones Industrial Average is down 679.77 points and NASDAQ is down 226.67 points.

LIVE CATTLE

Nearby live cattle contracts are adamant in trading higher and not giving up what Tuesday secured while deferred contracts are trading mildly lower. August live cattle are up $0.05 at $97.25, October live cattle are up $0.52 at $100.40 and December live cattle are up $0.55 at $104.07.

There's been a light to moderate trade reported at midday with Norther cattle selling for $155 to $156, and Southern cattle selling for $97. Asking prices are around $102 to $105 in the South and $160 in the North.

The Fed Cattle Exchange Auction listed a total of 1,221 head, with 276 actually sold, 945 head listed as unsold, and none listed as PO (Passed Offer). The state by state breakdown looks like this: Kansas 626 total head, with 192 head sold at $97.00, 434 head unsold; Nebraska 278 total head, with 84 head sold at $95.00, 194 head unsold; Texas 317 total head consisting of one lot, that did not sale. All cattle were set for 1-17 day delivery and had a weighted average of $96.43.

Boxed beef prices are lower: choice down $2.27 ($209.54) and select down $1.33 ($202.24) with a movement of 111 loads (59.38 loads of choice, 20.29 loads of select, 12.26 loads of trim and 18.65 loads of ground beef).

FEEDER CATTLE

The feeder cattle market will trade throughout Wednesday knowing all too well that Thursday carries a tremendous amount of pressure as two major feeder cattle auctions take place. If the board can close with some positivity the moral throughout the countryside will feel a little bit better as everyone tunes in to watch Thursday's feeder cattle sales. August feeders are up $0.17 at $133.37, September feeders are up $0.02 at $134.50 and October feeders are down $0.10 at $135.32.

LEAN HOGS

The lean hog complex's strength from Tuesday didn't seep into Wednesday's trade as both the cash market and futures contracts trade lower. July lean hogs are down $0.92 at $45.97, August lean hogs are down $1.20 at $51.32 and October lean hogs are down $0.82 at $50.10. Despite the markets being lower the fact that pork cutout values are up near $1.00 is a strong sign -- now hopefully prices can close stronger showing a sheer demand from consumers.

The projected lean hog index for 6/23/2020 is up $0.07 at $45.10 and the actual index for 6/22/2020 is up $0.11 at $45.17. Hog prices are lower on the National Direct Morning Hog Report, down $0.13 with a weighted average of $28.53, ranging from $24.00 to $30.00 on 5,395 head and a five-day rolling average of $28.51. Pork cutouts total 197.10 loads with 163.76 loads of pork cuts and 33.34 loads of trim. Pork cutout values: up $0.95, $64.13.

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Wednesday Morning Livestock Market Summary - Mixed Trade Likely Early

General Comments:

Cash cattle markets continue to weaken as the week progresses, despite the firm price support in futures trade. The significant amount of market-ready cattle in the pipeline that is expected to keep the industry under pressure through most of the summer is adding to the lack of negotiating power by feedlot managers through late June. It appears that there will be light trade trickling into the market on a daily basis, conforming to the trend seen over the past few weeks. This will likely limit any upside cash market support in the near future, especially if boxed beef values continue to slowly erode lower. Not that wholesale beef values have given back all of the premium built into the market over the last two months, it is uncertain just where support levels will develop as traders continue to focus on demand concerns. Futures trade is expected mixed to mostly higher with spillover buying likely in nearby contracts as August futures quickly bounced off support levels Tuesday, helping to bring more attention back to the cattle complex. But with nearby contracts still stuck in a moderate sideways trend, these triple-digit price swings do little to change the technical direction of the market. This could allow prices to swing back and forth within this range, causing additional wide price shifts, but essentially remain rangebound through the end of the month. Wednesday slaughter is expected at 122,000 head.

Firm gains in lean hog futures trade, which developed Tuesday, sparked some underlying market interest, although the ability to hold prices above early week support levels still remains in question. The reduction of pork in cold storage at the end of May helped to stimulate active support in all nearby contracts, but there growing question about pork demand. With August futures still flirting with long-term market lows seen early in the week, it is going to take much more than a strong one day shift higher to for traders to regain long-term market confidence. But given current price levels and the expectation that supplies will continue to tighten over the next several months, downside market moves seem to be limited, giving traders incentive to cover short positions at current price levels. Cash hog bids are expected $1 lower to 50 cents higher per cwt with most bids steady to weak. Slaughter Wednesday is expected at 471,000 head. Saturday runs are expected at 310,000 head.

	BULL SIDE		BEAR SIDE
1)	Sharp triple-digit gains in spot August live cattle futures Tuesday quickly put increased focus on the ability for traders to quickly and aggressively move back into the complex. This may quickly stimulate follow-through buyer support through the end of the week.	1)	Cash cattle prices continue to erode lower with packers still able to fill the active procurement levels with steady-to-lower prices. This continues to focus on the amount of cattle at market weigh, with limited options going into the hot summer months.
2)	Recent reductions in boxed beef values over the last three weeks is expected to create renewed short- and long-term buying from many wholesale and retail buyers as they rebuild stocks sold over the last couple of months. This should help to bring additional momentum to the currently pressured boxed beef values.	2)	Boxed beef values have still been unable to find strong support levels after moving below the pre-COVID levels. This is adding concerns of further market weakness based on eroding demand.
3)	Expectations of long-term market support through late 2020 and early 2021 is likely to help build buyer support at current price levels.	3)	Concerns of further pork demand by China given the growing tensions between the two countries may put additional pressure on the entire complex.
4)	Traders continue to focus on late-week reports in order to get a better indication of overall slaughter levels during May as well as a more accurate estimation of hog numbers in the country. These upcoming reports may create active position adjustments ahead of the release times Thursday.	4)	Cash hog values continue to slowly erode lower with limited negotiating power by producers as packers deal with still burdensome levels of hogs available for slaughter even though plant speeds are returning to more normal levels.

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