Thursday Morning Livestock Market Update - Lower Cash Cattle Trade to Continue

GENERAL COMMENTS:

Cattle futures tried to regain a foothold Wednesday, making a valiant effort to regain some of the recent losses. Although the October and later live cattle contracts closed slightly higher, the nearby August closed lower, resulting in a lower high and lower low. Even though the August carries a substantial discount to cash, traders have been unwilling to support the contracts, being concerned about the strength of cash over the next two months. We know supplies are tight, but the market is driven by demand. Cash cattle trade on Wednesday showed Southern live cattle $3.00 lower and Northern dressed cattle $5.00 lower. This may keep traders cautious about becoming exuberant with buying. Boxed beef prices were lower, with choice down $1.90 and select down $1.99. Feeder cattle showed greater weakness as traders are uncertain over near-term prices.

Hog futures have been the recipient of spread trading over the past week. Bear-spreading took place on Wednesday, unwinding the bull spreads of earlier in the week. Traders are uncertain whether support is being established or there may be another leg down at some point. The safer way to trade the market is through spread trading. The National Daily Direct Afternoon Hog report showed cash down $0.66 on good volume. It seems packers have purchased a large portion of their needs for the week with cash expected to be lower Thursday. Pork cutout values increased $0.22. The markets will be closed on Friday for the July 4 holiday weekend.

	BULL SIDE		BEAR SIDE
1)	Lower cash cattle trade is already factored in, which could result in some short-covering and new buying interest ahead of the extended weekend.	1)	Cash weakness was not expected and may cause traders to maintain the significant discount of August live cattle futures to cash.
2)	Fuel prices continue to decline, which may increase consumers' disposable income and help maintain strong beef demand despite high beef prices.	2)	Boxed beef prices may show weakness after the July 4 holiday as summer weather may impact beef consumption.
3)	Hog futures are slowly building an uptrend as support holds. Slaughter remains strong, indicating good demand.	3)	The weekly hog weights increased by 0.8 pounds to average 286.9 pounds. This is 2.8 pounds higher than a year ago.
4)	Hog futures remain oversold, which could result in further short-covering as the market seems to have established support.	4)	Hog futures continue to remain near support, trying to establish an uptrend. However, market fundamentals have provided little reason for traders to become bullish.

Wednesday Closing Livestock Market Update - Futures Close Lower Once Again

GENERAL COMMENTS:

Feeder cattle futures seemed to be on an early quest to regain at least a portion of the strong market losses seen earlier in the week. But the combination of softer cash cattle activity and general market apathy at the end of the session led to these early gains quickly eroding before the closing bell. The pushed spot August live cattle futures lower at the end of the session, although other nearby contracts were able to etch out the slightest of gains. Even though most live cattle contracts closed higher, this was still a moral defeat for the entire market, given the focus on rebounding from the late June market slide. Trade Thursday is expected to remain sluggish and likely once again unpredictable given the long holiday weekend approaching, and the lack of additional market news from a fundamental or technical standpoint before the end of the week. Hog prices closed lower on the Daily Direct Afternoon hog report, down $0.66 with a weighted average of $96.92 on 6,950 hogs. December corn closed up 6 1/4 at $4.423 and December soybean meal closed up $1.60 at $304.7. The Dow Jones Industrial Average is down 13.96 at 52,305.24.

LIVE CATTLE:

Live cattle futures closed mixed Wednesday in limited trade volume as traders not only took into account the inability of feeder cattle to hold early gains, but also the general lack of buyer interest moving back into the market after late-month liquidation seemed to be generally disheartening. August futures were the only contract to close lower in the nearby contracts, but even this shift remains concerning, especially given the chart direction as June contracts expired, and August took over as spot month contracts at a $12 per cwt discount. Chart shifts do not create a clear picture of the market; we all understand this. But for those traders who are measuring market direction from a 30,000 ft view, it does become a factor in at least a portion of the buying decisions. Trade is expected to remain extremely sluggish throughout the rest of the week, which may add even more volatility to the market Thursday.

Cash cattle trade started to develop through mid to late afternoon, although it is likely that additional trade will still need to be done before the end of the week for next week's full processing schedules. Light trade developed in several areas this afternoon, with Northern dressed deals at mostly $403, $5 lower than last week's weighted averages. Southern live trade came in at $255, $3 lower than the prior week's weighted averages. Much of this trade was done after the Mandatory cut-off, so it will be interesting to see just how many head traded when summaries are released tomorrow. August live cattle closed $0.60 lower at $241.825, October live cattle closed $0.08 higher at $236.725 and December live cattle closed $0.20 higher at $236.575. 

Wednesday's slaughter is estimated at 110,000 head, 2,000 head more than a week ago and 11,000 head less than a year ago. 

Boxed beef prices closed lower: choice down $1.90 ($391.26) and select down $1.99 ($369.69) with a movement of 113.12 loads (78.51 loads of choice, 15.38 loads of select, 9.12 loads of trim and 10.11 loads of ground beef).

THURSDAY'S CATTLE CALL: Steady with Wednesday, Light but limited trade is still expected in the cash markets Thursday. The early moves of cattle, $3 to $5 per cwt lower than last week's average, seem to set a lower tone for the week.

FEEDER CATTLE:

Feeder cattle futures were probably the most disappointing complex in the livestock market Wednesday. Early buyer support stepped into the complex, helping prices rebound slightly from early-week losses. But the inability to sustain these triple-digit gains and close lower in all nearby contracts added even more concern and uncertainty to the entire feeder cattle market, which has tumbled significantly in the last week. With markets closed Friday, and many traders expected to remain absent Thursday ahead of the holiday break, it is unlikely that a strong market direction will develop yet this week. August feeders closed $0.45 lower at $364.15, September feeders closed $0.35 lower at $362.175 and October feeders closed $0.35 lower at $359.3. The CME Feeder Cattle Index for June 29: down $0.41, $376.99.

LEAN HOGS:

Lean hog traded caught wind of the lack of support through the rest of the complex, Wednesday afternoon. The most aggressive pressure was seen in nearby contracts, with August futures leading the market lower with a $1.15 per cwt loss. August futures remain extremely lightly traded, especially given the limited market volume and activity during this holiday week. But the inability to show positive results, given the current market pressure, is adding even more concerns both fundamentally and technically. Although the overall lack of interest in the market this week is making it hard to put too much stock into any daily moves, but the lack of optimism in the market continues to be very evident. July lean hogs closed $0.98 lower at $93.35, August lean hogs closed $1.15 lower at $97.05 and October lean hogs closed $0.50 lower at $81.50. Wednesday's hog slaughter is estimated at 474,000 head, 8,000 head more than a week ago and 2,000 head more than a year ago. Pork Cutouts totaled 239.37 loads with 197.98 loads of pork cuts and 41.39 loads of trim. Pork cutout values are up $0.22 at $95.71. The CME Lean Hog Index for June 29: down $0.17, $91.24.

THURSDAY'S HOG CALL: Steady. Limited market direction is expected through the end of the week. Thursday is expected to be the last full day of hog processing for the week through the country, with holiday schedules limiting overall plant capacities Friday and Saturday due to the Fourth of July Holiday.

Wednesday Midday Livestock Market Summary - Buyer Support Develops

GENERAL COMMENTS:

Livestock futures have gained light to moderate buyer support, as traders shake off the pressure seen over the last couple of days with a new month and new quarter to focus on. The reality is there is very little new information available in the market and overall trade interest should be quiet this entire week due to the holiday. Each day there will likely be even less participation and market interest ahead of the holiday with futures markets closed Friday. Firm triple-digit gains have developed in both live and feeder cattle contracts Wednesday morning, but this is still unable to reverse the strong market weakness seen over the last week. Lean hog futures are mostly higher in limited but positive trade interest with narrow gains able to be sustained through most of the morning session. December corn is up 4 3/4 at $4.408 and December soybean meal is up $1.70 at $304.8. The Dow Jones Industrial Average is up 407.68 at 52,726.88.

LIVE CATTLE:

Live cattle futures have firmed slightly at midweek, although the tone and activity of the entire cattle complex -- and especially the live cattle market -- seems cautious at best. Following the strong market move lower over the past couple of weeks, traders remain concerned about the ability to sustain beef values and product support through the last summer and fall months. At this point, the ability to move additional domestic product at higher price levels this year has gone well. But the underlying concern remains about the economy, whether consumers will start cutting budgets, and where the first and most drastic cuts will be seen. This is leading factor for the recent market volatility in both feeder cattle and live cattle futures over the past couple of months. Cash cattle markets remain generally undeveloped Wednesday morning. A few bids are now on the table in parts of eastern Nebraska, but asking prices remain very elusive; the rest of cattle country remains very quiet. Packer inquiry should continue to improve as the day progresses. It is expected that both sides will try to wrap things up before Friday and extend the holiday weekend. But for now, there is likely to be a wide gap to close before any significant trade can be agreed on. August live cattle are $0.25 higher at $242.675, October live cattle are $0.90 higher at $237.55, December live cattle are $0.88 higher at $237.25. 

Boxed beef prices are Lower: choice down $0.19 ($392.97) and select down $1.10 ($370.58) with a movement of 59.40 loads (39.78 loads of choice, 6.49 loads of select, 6.31 loads of trim and 6.82 loads of ground beef).

FEEDER CATTLE:

Feeder cattle futures are leading the cattle market and entire livestock complex higher Wednesday morning as traders are covering previous losses seen at the end of June. Although very little has changed fundamentally or technically in the market over the past couple of days, the fact that traders are working on a new month and quarter of books has in itself helped spark some buyer support back into the complex. All nearby contracts are holding gains of $2 per cwt or greater at midday. Without any additional significant shifts in outside market news, it is likely this support will hold, allowing traders to potentially carry the renewed interest into the end of the week. With markets closed Friday for the Fourth of July holiday, and overall trade interest subdued through the entire week due to holiday and vacation schedules, it is not surprising that overall market participation has been limited during the entire week. August feeders are $1.98 higher at $366.575, September feeders are $1.80 higher at $364.325 and October feeders are $1.78 higher at $361.425.

LEAN HOGS:

Lean hog futures are mostly higher Wednesday morning, although limited interest and new market information as the session has continued is eroding a portion of early support. Mixed trade with light pressure in nearby contracts is being offset by light to moderate buying activity very slowly trickling into deferred contracts. Traders seem to be finding some underlying support at current price levels, although prices are still well below the 40-day moving average in all nearby contracts. The longer-term concern about expanded pork demand and the ability to open up increased export trade continues to be the biggest shadow hovering over the market heading into July. July lean hogs are $0.45 lower at $93.875, August lean hogs are $0.28 higher at $98.475 and October lean hogs are $0.53 higher at $82.525. Hog Prices are higher on the Daily Direct Morning Hog report, up $0.11 with a weighted average of $97.16, ranging from 94.00 to 98.00 on 4,125 head with a five-day rolling average of 97.14. Pork cutouts totaled 149.81 loads with 120.83 loads of pork cuts and 28.98 loads of trim. Pork cutout values are up $0.83 at $95.62.

Wednesday Morning Livestock Market Summary - CME to Launch a Beef Trim Contract

GENERAL COMMENTS:

The June live cattle contract went off the board on a positive note Tuesday, settling at $258.20. The discount held by the August contract increased further on Tuesday and was about $16.00 below the June. This could point to strength as time moves forward and the cash market holds where it currently is. Some of the recent selling might have been due to it being the end of the month and the end of the quarter, as fund traders took some profits to close out their books. If that were the case, they may renew buying Wednesday. Cash cattle have not yet traded and may not trade Wednesday either. Boxed beef prices were mixed with choice up $1.72 and select down $2.50. CME will launch beef trim futures and options tied to 50% lean and 90% lean trim, the key inputs used to make ground beef, hamburgers and meatballs. It signals beef price volatility has become big enough that CME sees demand for a more precise risk-management product beyond live cattle and feeder cattle futures. The contract will begin on July 20.

Hog futures did not show much volatility Tuesday with traders finding little to move the market significantly. Futures have seen greater support in the nearby month and have developed a slight uptrend. Later contracts continue to remain in a sideways pattern. Packers have been more aggressive with the National Daily Direct Afternoon Hog report showing a gain of $4.14 on good volume. Packers wanted to purchase hogs early due to the upcoming holiday weekend. The aggressive buying may be finished with lower cash prices expected Wednesday. Unfortunately, pork cutout values declined $2.17.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have declined for three consecutive days. Now that it is a new month, traders may step back in to purchase more aggressively.	1)	With July 4 demand being met, beef prices may slide further as we move into the dog days of summer.
2)	The August live cattle contract continues to hold a large discount to cash. Futures may move higher to narrow the gap.	2)	Cattle futures may see further weakness as the market is not receiving continued bullish news.
3)	Nearby hog futures are trending higher as some near-term fundamentals may be showing positive signs.	3)	Later hog contracts have not been able to break out of the sideways trading pattern; a break below that level would trigger further selling.
4)	Cash hogs are showing increased support, with the weighted average on Tuesday moving to $97.58.	4)	Pork cutouts have not seen consistent support, which is needed for traders to turn bullish.