Monday Midday Livestock Market Summary - Cattle Futures Set New Highs Following Tighter Placements

GENERAL COMMENTS:

Traders quickly reacted to the positive cattle on feed numbers in Friday's USDA report. This helped live cattle and feeder cattle futures to surge to new contract highs in most nearby contract months. The underlying support is likely to continue through the rest of the session, adding potential gains through the rest of the week. Hog futures remained mixed early in the session, but the softness in pork and cash hog prices is causing some volatility to develop in most contract months. December corn is down 2 cents per bushel, and December soybean meal is down $660 per ton. The Dow Jones Industrial Average is up 274 points.

LIVE CATTLE

Triple-digit gains are holding in all live cattle futures trade Monday morning. October and December contracts are leading the complex higher, also posting new contract highs. Early trade interest is adjusting to the moderately bullish Cattle on Feed report Friday, which posted 11.07 million cattle on feed. This is the lowest number since last September, which could indicate that further on-feed reductions may be seen in the months to come. Despite midday pullback in feeder cattle futures, live cattle contracts continue to hold well into midday, and could spark renewed buyer support in the last hour of trade. Cash cattle interest remains extremely sluggish with asking prices and bids still undeveloped. It is likely to be close to midweek before active interest redevelops. 

Monday morning's boxed beef prices are higher once again with choice cuts up $3.10 at $348.77 and selects up $0.94 at $318.60 on a total count of 47 loads. Continued support in boxed beef values is not a surprise, but it may not spark renewed support through cash markets over the near future. Dow Jones estimated Monday's cattle slaughter at 118,000, 1,000 higher than a week ago.

FEEDER CATTLE

Aggressive early week gains have flooded into most feeder cattle trade. Although spot-month August contracts are still under light pressure, triple-digit gains are holding in other nearby contracts. October futures are setting contract highs, moving $2.05 per cwt higher at midday to $167.60 per cwt. The lighter-than-expected placement level has sparked early buyer support. Even though this is extremely good news for the market, it is still uncertain just how much long-term support will be seen over the next couple of days. The overall direction of the market is also being supported by recent pressure in grain prices. The CME Feeder Index was priced at $155.79 for Aug. 19.

LEAN HOGS

Mixed trade is seen in lean hog futures with light-to-moderate pressure seen in October futures as prices are hovering at $88.30 per cwt following a 40-cent loss. The firmness in cattle trade is helping to spark renewed underlying support through the rest of the complex, although prices are unable to spark active buyer interest. Morning pressure in pork and cash hog prices has created some uncertainty through the complex, which could lead to further losses as the day continues. Pork primals are mixed, but the generally weaker tone early in the week could create significant pressure in upcoming hog markets. Cutouts are down $4.53 at $114.73 Monday morning on 172.07 loads. Negotiated hog prices are $3.67 per cwt lower with a weighted average price of $92.47 per cwt on 9,192 head on the National Direct Morning Hog Report. The swine/pork market formula price is listed at $106.95 per cwt. Dow Jones estimated Monday's hog slaughter at 477,000, 5,000 above a week ago, while 9,000 more than year ago levels. The CME Lean Hog Index is estimated at $107.90 for Aug. 20.

Monday Morning Livestock Market Update - Futures Expected to Open Higher

GENERAL COMMENTS:

The expectation of a friendly Cattle on Feed report was well founded as the report met that expectation overall. The on-feed number was 98% with trade expectations of 98.3%, which should provide some support. Placements of 92% compared to last year and expectations of 93.2% also should provide support as they indicate supplies should tighten as the year progresses. However, marketings were 95% of a year ago compared to expectations of 96.5%. This is viewed as a bit bearish as lower marketings could mean near-term supplies are plentiful. Bear in mind the actual is compared to estimates from which we determine the report is either bullish or bearish. The bottom line is all numbers are below a year ago which can be considered friendly. The larger issue remains of the disparity between cash and beef prices. Cash cattle were $1 to $2 higher last week while boxed beef prices soared. On Friday, choice cuts jumped $3.43 while select cuts gained $2.12. Futures should extend gains Monday, but bear in mind, the price increases Friday may have already factored in the report.

October hog futures came very close to closing the chart gap Friday but could not accomplish the task nor could they hold the highs. The expectation for cutouts trending higher has not fully come to fruition. Packers continue to find sufficient hogs, which leaves them less aggressive in the cash market. The National Direct Afternoon report on Friday showed prices down $2.40. Sufficient hogs are being found to keep plants operating and demand filled. Cutouts declined $2.14 on Friday, which does not paint a strong picture for more strength in futures to begin the week.

	BULL SIDE		BEAR SIDE
1)	Lower placements on the Cattle of Feed report show a continuation of the decline of placements over the past few months. Cattle numbers may tighten as the year progresses.	1)	Marketings in July were a little less than expected, which may offset lower placements in the coming months if the trend continues.
2)	Feedlots will set higher offers this week due to a friendly Cattle on Feed report and sharply increasing boxed beef prices.	2)	Labor Day demand may come to an end soon, which may result in boxed beef prices sliding.
3)	Hog futures rallied despite lower cash and cutouts. The large discount of October futures to cash may provide support.	3)	Hog futures could not hold their highs Friday, which may indicate upside is limited unless cash and cutouts turn higher.
4)	October has a price gap in the chart over $1.00 above the market that needs to be closed.	4)	Cumulative export sales of pork so far this year have totaled 1.354 million metric tons, compared to 1.436 mmt during the same period last year.

Friday Closing Livestock Market Update - Active Pre-Report Buying Rallied Feeder Cattle Futures

GENERAL COMMENTS:

Cattle on feed numbers are listed at 11.07 million head at the end of July. This is the smallest on feed count since the end of August 2020. Total on feed numbers fell 2% from year ago levels, well within pre-report expectations. Late-day buying quickly developed in all livestock contracts Friday with cattle traders adjusting positions in front of the report. This pushed September contracts $2.60 per cwt higher at the closing bell. Hog prices closed lower on the National Direct Afternoon Hog Report in moderate trade, down $2.40 with a weighted average of $96.40 on 5,402 head. December corn is down 13 3/4 cent per bushel and December soybean meal is up $1.30 per ton. The Dow Jones Industrial Average is up 225 points and NASDAQ is up 172 points.

LIVE CATTLE:

Live cattle futures firmed in late-day trade after spending most of the session mixed. The underlying support in feeder cattle and hog futures helped bring buyers back to the table just before the closing bell. Cattle on feed numbers came in as expected with a total of 11.07 million head on feed at the end of last month. This is not expected to lead to significant market shifts early next week; but it could add to market volatility already seen in the complex. August live cattle closed $0.87 higher at $124.27, October live cattle closed $0.90 higher at $129.05 and December live cattle closed $0.55 higher at $134.52. Cash cattle activity remained sluggish through most of the day, with just a little clean-up trade in the South. Prices are $121 to $122 per cwt, steady to $1 per higher than last week's average. Most Northern deals are listed at $200 per cwt, steady with the rest of the week.

Friday's slaughter is estimated at 116,000 head -- even with a week ago and 1,000 head less than a year ago. Week-to-date totals are listed at 595,000 head; 13,000 more than a week ago and 9,000 more than a year ago totals.

Boxed beef prices closed higher: choice up $3.43 ($345.06) and select up $2.12 ($318.53) with a movement of 85 loads (44.77 loads of choice, 11.08 loads of select, 15.49 loads of trim and 13.7 loads of ground beef).

MONDAY'S CASH CATTLE CALL: Steady. Early week cash cattle trade is expected to remain extremely sluggish, with traders focusing on futures market direction as they work through the Cattle on Feed report. Cash market interest may not be seen until midweek or later.

FEEDER CATTLE:

Feeder cattle futures posted the most aggressive support at the end of the day. Although most of the session saw very limited activity, buyer interest flooded the market in the last hour of trade as traders anticipated lower-than-expected placement levels on the Cattle on Feed report. September contracts led the complex higher with gains over $2 per cwt. Total placements of feeder cattle in July were moderately under expected levels, creating moderate bullishness likely to be seen in the market next week. The big question is: Was the late-day rally was enough to account for the smaller placement levels? This will still have to be seen at opening bell Monday morning. August feeders closed $0.75 higher at $159.02 September feeders closed $2.60 higher at $165.50 and October feeders closed $2.15 higher at $167.62. The CME Feeder Cattle Index 8/18/2021: up $0.18, $155.42.

LEAN HOGS:

Sharp gains seen through the entire session Friday led to increased underlying support across all lean hog contracts. Trade remained generally light during most of the session, but traders were able to aggressively push the spot-month contract above $88 per cwt. The underlying support in the complex is likely to bring about renewed interest next week, although it is still uncertain just how much higher prices will go given the lack of support in cash hog values. October lean hogs closed $1.70 higher at $88.62, December lean hogs closed $1.15 higher at $81.70, and February lean hog futures closed $0.87 higher at $84.10. Pork prices shifted lower despite strong gains in the morning report. Pork cutouts totaled 296.96 loads with 268.44 loads of cuts and 28.52 loads of trim. Pork cutout values: down $2.14, $119.26. Friday's slaughter is estimated at 471,000 head -- 13,000 head above a week ago and unchanged from a year ago. Estimated week-to-date slaughter totals are reported at 2.54 million head -- 38,000 above week ago levels, but 16,000 head less than year ago totals. The CME Lean Hog Index 8/18/2021: down $0.99, $108.18.

MONDAY'S CASH HOG CALL: Steady. Steady bids are expected early Monday, although at this point so much can change through the day. Packers continue to focus on active procurement levels but are still not needing to aggressively increase spending to gain access to market ready hogs.

Friday Midday Livestock Market Summary - Futures Rallying in Late Week Trade

GENERAL COMMENTS:

The daily back-and-forth market swings in cattle and hog futures are becoming very predictable through the month of August. The lack of ability to string two days of gains together is not only creating concern about follow-through support in the market, but is also keeping some traders out of the market. The strong surge in lean hog futures trade is led by spot month contracts, where gains of $2 per cwt are leading the market higher. Cattle futures are holding firm nearby gains, but the upcoming Cattle on Feed report is creating some uncertainty in the market. Expectations of lower placements and overall on feed numbers should help spark support, but trader interest is still uncertain. December corn is down 10 cents per bushel and December soybean meal is down $0.60 per ton. The Dow Jones Industrial Average is up 234 points.

LIVE CATTLE

Live cattle futures remain mixed in light to moderate trade Friday morning. Although there is very little activity in cash cattle markets, the underlying support in all livestock trade and strong upward moves in financial markets have gained the attention of most traders. August contracts are very lightly traded but are leading the complex higher with an 82-cent per cwt gain. Firm support in October futures is pushing price levels to $128.72 per cwt, as traders continue to look for additional support early next week after the Cattle on Feed report. The biggest question surrounding the afternoon report is just how much of the anticipated market support has already been priced into the complex. This will not be answered until Monday morning, but could lead to less volatility than some expect over the next couple of days. Cash cattle markets remain quiet through Friday morning. Although it is likely that some additional trade may still develop, it appears that, by the lack of active interest so far, the bulk of trade may already be done. Unless there is a significant shift from expected on feed numbers, cash prices on any additional trade will likely fall in line with previous sales for the week. Asking prices remain firm around $123 live and $202 and higher. 

Friday's morning's boxed beef prices are higher once again with choice cuts up $3.14 at $344.77 and selects up $2.19 at $318.60 on a total count of 54 loads. Firm gains have continued to steadily develop in boxed beef values, although cash and futures prices are showing no sign of jumping onto the bandwagon. The concern that beef values will not be able to hold recent gains, as Labor Day buying ends, is still creating market apathy. Dow Jones estimated Friday's cattle slaughter at 117,000, 1,000 higher than a week ago.

FEEDER CATTLE

Feeder cattle futures have gained renewed support as traders continue to look toward the Cattle on Feed report Friday afternoon. It is expected that cattle placements in July will fall nearly 7% from year-ago levels, indicating additional tightness for cattle in the near future. The strong pullback in grain trade Friday morning has also sparked buyer support in nearby feeder cattle trade. Although Thursday's corn market losses did very little to support feeder cattle prices, the market slide over the past two days is creating significant shifts in production costs, if feeders are able to take advantage of forward pricing. September feeder cattle futures remains the focus of the complex with prices holding 90-cent gains and trading at $163.80 per cwt. These price levels put spot month futures within $1 per cwt of contract highs, causing some traders to anticipate further support next week. The CME Feeder Cattle Index was priced at $155.42 for Aug. 18.

LEAN HOGS

Aggressive gains have developed in nearby lean hog futures as traders bounce back from Thursday's losses. October futures are leading the market higher, posting gains of $2.67 per cwt at midday. The potential to hit limit gains of $3 per cwt is not out of the question, although there seems to be some uncertainty as to just how much follow-through support may develop in the last hour of trade. Triple-digit gains are seen in all nearby contracts as traders continue to test technical support combined with firming fundamental market strength at the end of the week. Pork primal prices have surged higher once again, driven by aggressive gains in ham and belly and rib cuts. Ham values increased $22.28 per cwt in the morning report. Cutouts are up $7.80 at $129.20 Friday morning on 206.16 loads. Negotiated hog prices are $1.85 per cwt lower with a weighted average price of $96.14 per cwt on 4,159 head on the National Direct Morning Hog Report. The swine/pork market formula price is listed at $106.91 per cwt. Dow Jones estimated Friday's hog slaughter at 471,000, 12,000 above a week ago, while 6,000 less than year-ago levels. The CME Lean Hog Index is estimated at $107.56 for Aug. 19.