Tuesday Morning Livestock Market Update - Higher Corn Futures May Pressure Cattle

GENERAL COMMENTS:

Cattle were lower as expected yesterday but held well despite the bearish Cattle on Feed report. The complex might struggle this week as a result of the report and the expectation that packers may not be as aggressive. Feedlots may still be in the driver's seat as show lists are smaller leaving packers with fewer to choose from. Corn futures were higher overnight due to a 3% decrease in crop condition and the first leg of the Pro Farmer crop tour showing variable yields and crop stress. This is expected to put pressure on feeder cattle which will keep pressure on live cattle as well. Boxed beef was slightly higher with choice up $0.24 and select up $0.42. The Commitment of Traders report showed funds as net buyers of 16,964 contracts bringing their net long total to 66,036.

Hogs may have run its liquidation course. However, it will be difficult for futures to regain the losses suffered. For one, neither October nor December closed the chart gap. December came within 12 points of filling the gap before rebounding. This leaves gaps remaining as technical trade targets. The surprise yesterday was the strength of cash with the National Direct Afternoon Hog report showing a gain of $8.55. There should be some follow through today as packers need hogs to fill increased chain speed. Cutouts were moderately higher with a gain of $0.46. The Commitment of Traders report showed funds were net buyers of 6,804 contracts bringing their net long positions to 71,957 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle were able to hold well after the bearish Cattle on Feed report. Strong demand is expected to continue.	1)	The bearish Cattle of Feed report will be a cloud hanging over the market for a period. Higher placements will mean more cattle will be available down the road.
2)	Show lists are lighter this week which may cause packers to bid more aggressively to obtain the required number to fill the higher slaughter pace.	2)	The end of the summer grilling season is near and with it may go some of the strong demand we have been seeing.
3)	Hogs seem to have run their liquidation course and may find support at the current level.	3)	October and December hog futures still have chart gaps remaining below the market. December came within 12 points of closing the gap yesterday. Futures may drop back to close the gaps.
4)	Very strong cash yesterday showed packers are buying early and aggressively as slaughter pace increases.	4)	Pork in cold storage for July was 20% above a year ago with belly stocks 53% higher. Sufficient pork is available to demand.

Monday Closing Livestock Market Update - Higher Corn and Friday's COF Report Pressure Cattle

GENERAL COMMENTS:

The livestock complex had a mixed start to the week as the lean hog complex found support, but the cattle complex bobbled. If corn prices show some mercy in Tuesday's market, than the feeder cattle complex may be able to trade higher. Hog prices closed higher on the Daily Direct Afternoon Hog Report, up $8.55 with a weighted average of $126.35 on 9,020 head. December corn is up 5 3/4 cents per bushel and December soybean meal is up $13.10. The Dow Jones Industrial Average is down 643.13 points.

Monday's Cold Storage report shared that total red meat supplies in freezers were down 1% from the previous month, but up 23% from last year. Total pounds of beef in freezers were down 1% from the previous month, but up 27% from last year. Frozen pork supplies were down 2% from last month, but up 20% from last year. Stocks of pork bellies were down 20% from last month but up 53% from last year.

LIVE CATTLE:

The live cattle complex wasn't able to shake the doggish Cattle on Feed report that came out last Friday, and the nearby contracts felt it's wrath while the deferred contracts kept on trudging higher. August live cattle closed $0.37 lower at $141.22, October live cattle closed $0.75 lower at $144.50 and December live cattle closed $0.45 lower at $150.52. Given how the market sits fundamentally (strong boxed beef prices, aggressive throughput, thin showlists), this lower tone isn't expected to last very long or derail the market's trajectory. This week's cash cattle trade could be a gamble, however, as packers are buying for the holiday shortened Labor Day week, which will require fewer cattle than normal, and as some plants are planning on being dark even later this week. Nevertheless, the cash cattle market may see steady to slightly lower prices this week, but again the long-term trajectory is still higher. August live cattle closed $0.37 lower at $141.22, October live cattle closed $0.75 lower at $144.50 and December live cattle closed $0.45 lower at $150. 

Last week Southern live cattle traded at mostly $142, which is $2.00 higher than last week's weighted average, and Northern dressed cattle sold for mostly $234, which is $4.00 higher than last week's weighted average. Last week's negotiated cash cattle trade totaled 101,555 head. Of that, 69% (70,495 head) were committed to the nearby delivery, while the remaining 31% (31,060 head) were committed for the deferred delivery.

Monday's slaughter is estimated at 125,000 head, 4,000 head more than a week ago and 8,000 head more than a year ago. New showlists appear to be lower in all major feeding states.

Boxed beef prices closed higher: choice up $0.24 ($264.52) and select up $0.42 ($238.36) with a movement of 89 loads (44.83 loads of choice, 21.26 loads of select, 9.96 loads of trim and 13.14 loads of ground beef).

TUESDAY'S CASH CATTLE CALL: Steady. Given that showlists are thin, feedlots may be able to hold prices steady, but given that packers are buying for a holiday-shortened week makes it somewhat unlikely that feedlots will be able to demand more money.

FEEDER CATTLE:

Throughout the day, the corn complex grew stronger and stronger, and with the feeder cattle market having to bear the weight of Friday's Cattle on Feed report amid a $0.05 to $0.07 stronger corn complex, the market had little hope of closing higher. August feeders closed $0.10 lower at $181.40, September feeders closed $0.40 lower at $184.35 and October feeders closed $0.30 lower at $186.47. The question that both the live cattle market and feeder cattle market yearn to know is: How long is the market going to be fixated on Friday's COF repot before it shakes that news and again clings to the market's strong fundamentals? It would surprise me if the market continued to trade lower past Wednesday, but if corn prices keep scaling higher, then feeder could remain pressured. At Oklahoma National Stockyards in Oklahoma City, Oklahoma, at their midsession point and when compared to last week, feeder steers were trading $4.00 to $6.00 lower and feeder heifers were trading steady to $4.00 lower. Steer and heifer calves were trading unevenly steady. The CME Feeder Cattle Index for Aug. 19: up $1.45, $180.66.

LEAN HOGS:

The lean hog complex closed higher by Monday's end as the market has seemed to find some support for the time being. The real question that only time will answer is whether or not this is the market's true bottom for the move. October lean hogs closed $0.85 higher at $93.97, December lean hogs closed $0.32 higher at $84.47 and February lean hogs closed $0.67 higher at $87.70. It was rather interesting to see cash hog prices up over $8.00 higher on Monday's afternoon report as the market doesn't usually see support until Tuesday or Wednesday. The day's movement wasn't big (only 9,020 head traded), but to see price already $8.55 stronger indicates that packers are again going to chase after this week's cash hog market. Pork cutouts totaled 313.39 loads with 260.07 loads of pork cuts and 53.32 loads of trim. Pork cutout values: up $0.46, $117.61. Monday's slaughter is estimated at 478,000 head, 36,000 head more than a week ago and 39,000 head more than a year ago. The CME Lean Hog Index for Aug. 18: down $0.31, $120.29.

­­­­­TUESDAY'S CASH HOG CALL: Higher. It was out of the ordinary to see cash hogs trading higher on a Monday, which could be an indication that packers are thinly bought and were eager to get some hogs bought for comfort.

Monday Midday Livestock Market Summary - Cattle Wrestle With Friday's COF Report

GENERAL COMMENTS:

The cattle contracts are trending lower as the market absorbs Friday's bearish Cattle on Feed report. The lean hog complex has finally found some support and it's pushing its contracts higher. Monday afternoon, the monthly Cold Storage report will be released. December corn is up 5 3/4 cents per bushel and December soybean meal is up $13.30. The Dow Jones Industrial Average is down 484.46 points.

LIVE CATTLE:

The live cattle market is sluggishly making its way toward the noon hour as the market longs for technical support after Friday's bearish (but expected) Cattle on Feed report. August live cattle are down $0.25 at $141.35, October live cattle are down $0.85 at $144.40 and December live cattle are down $0.67 at $150.30. A couple of plants are rumored to be dark on Saturday, which could hinder packers' need of supporting the cash cattle market as aggressively as they have in the last couple of weeks. Nevertheless, once the holiday shortened Labor Day week is behind the market and things go back to a normal schedule, packers will likely be aggressive again in the marketplace as thin supplies and aggressive throughput pushes cattle throughout the market more aggressively than expected.

Last week Southern live cattle traded at mostly $142, which is $2.00 higher than last week's weighted average, and Northern dressed cattle sold for mostly $234, which is $4.00 higher than last week's weighted average.

Last week's negotiated cash cattle trade totaled 101,555 head. Of that, 69% (70,495 head) were committed to the nearby delivery, while the remaining 31% (31,060 head) were committed for the deferred delivery.

Boxed beef prices are higher: choice up $1.90 ($266.18) and select up $2.39 ($240.33) with a movement of 37 loads (17.96 loads of choice, 5.79 loads of select, 8.59 loads of trim and 5.11 loads of ground beef).

FEEDER CATTLE:

The feeder cattle market is drifting lower as the market absorb Friday's Cattle on Feed report. The market has flirted with the idea of trading higher and forgetting all about Friday's report, but, with the corn market pushing a $0.03 to $0.05 rally, the market is skeptical of running into Monday's market with too much vigor. It was noticeable in last week's sale receipts that ranchers are beginning to send their calves to town and that the fall run is starting earlier this year as ranchers try to combat drought related stressors again. August feeders are steady at $181.50, September feeders are down $0.75 at $184.00 and October feeders are down $0.62 at $186.15.

LEAN HOGS:

After last week's tumultuous descend, the lean hog complex has found some support in Monday's market. Now the big question that remains is: Is this the bottom of the move or will the market see more pressure?

Cash prices are expected to be higher again this week as market ready supplies of hogs are still desperately thin. October lean hogs are up $1.82 at $94.95, December lean hogs are up $0.77 at $84.95 and February lean hogs are up $0.80 at $87.82. If pork cutout values can continue to show support, then the futures market may keep its elevated tone and packers may be willing to keep processing speeds at least steady.

The projected lean hog index for Aug. 19 is down $0.31 at $119.98, and the actual index for Aug. 18 is down $0.31 at $120.29. Hog prices are higher on the Daily Direct Morning Hog Report, up $4.66 with a weighted average of $121.01, ranging from $112.00 to $135.00 on 4,773 head and a five-day rolling average of $123.84. Pork cutouts total 181.61 loads with 140.69 loads of pork cuts and 40.92 loads of trim. Pork cutout values: up $3.86, $121.01.

Monday Morning Livestock Market Update - Cattle Expected to Gap Lower

GENERAL COMMENTS:

Live cattle closed higher on Friday but could not hold the highs of the day. Traders positioned themselves ahead of the Cattle of Feed report trimming some of the gains. The last number of reports were miscalculated by the trade and this one was no exception. On feed numbers were close at 101% so no real surprise there. Placements were the bearish surprise at 102% compared to the previous year and were even above the highest trade estimate. On top of that, marketings were 96% of a year ago right on the low end of the trade estimates and almost 1.0% below the average estimate. Futures are expected to be under pressure today as traders react to the report. More cattle have moved to feedlots due to drought conditions in many areas which could be more bullish over time, but feeder cattle are in demand as buyers have been aggressive at auctions as they anticipate higher prices down the road. Boxed beef was mixed on Friday with choice down $0.11 with select up $0.47.

Hogs could not catch a break on Friday posting triple-digit losses in most contracts. Traders were looking at lower cash and lower cutout during the day with the final print showing substantial declines. The National Direct Afternoon Hog report showed cash down $6.29. This was coupled with cutouts down $2.76 ending the week on a bearish note. Packers will wait for information on product movement over the weekend before deciding how aggressive they need to be. The October contract came close to the chart gap but bounced before reaching it.

	BULL SIDE		BEAR SIDE
1)	Higher placements in feedlots along with a continued strong slaughter pace may mean tighter supplies over time.	1)	The Cattle on Feed report showed bearish placements and marketings. Futures may gap lower and remain under pressure today.
2)	Feeder cattle are in strong demand as buyers remain aggressive. Tightening numbers potentially mean tighter supply down the road.	2)	Cattle could move into a liquidation phase like hogs. They have been tracking each other similarly in trend.
3)	Hog slaughter is increasing as hog weights are decreasing. Packers need to purchase more to provide the required tonnage.	3)	October and December hog futures have yet to close the chart gaps below and seem to be bent on accomplishing that purpose.
4)	Hog futures have corrected their oversold position and may be ready for a bounce after the liquidation.	4)	Traders may trade the weakness of cash and cutouts from Friday keeping futures under pressure.