GENERAL COMMENTS:
Sharp losses flooded the entire livestock market
Friday as traders continued to focus on larger-than-expected beef
supplies in July and the bearish market tone continued as traders
adjusted from earlier-week gains. Nearby hog futures closed limit down,
breaking through long-term support levels. From Friday to Friday,
livestock futures scored the following changes: Aug LC, up $4.70; Oct
LC, up $1.35; Aug FC, up $2.78; Sep FC, up $0.88; Oct LH, off $2.70; Dec
LH, off $2.00. Cash cattle trade developed through the second half of
Friday with Southern live trade seen mostly $106 per cwt. This is
generally $1 per cwt higher than last week, but still continues to focus
on the underlying market weakness seen in the entire cattle complex.
Dressed trade in the North developed with most trade to major packers at
$175 per cwt. This is $4.50 per cwt higher than last week. A few deals
were reported to regional packers with delayed delivery agreements at
$176 to $178 per cwt. The National Daily Direct afternoon hog report was
$1.57 lower ($55-$70.00, weighted average $64.55 per cwt) on 13,468
head sold. Corn futures inched lower in light trade with September down 3
1/2 cents lower. Stock markets were lower in active trade with the Dow
down 623 points and the NASDAQ down 239 points.
LIVE CATTLE: Futures closed $0.35 to $1.80
lower. Triple-digit losses flooded the cattle complex as traders focused
not only on the bearish cold storage report, which showed a strong
inventory build from June, but also on China announcing increased
tariffs on U.S. ag imports in retaliation to U.S tariffs that are set to
go into place on Sept. 1. Even though beef to China is a part of these
latest tariffs, the amount of beef sold to China is very small in
comparison to overall China imports and U.S. beef exports. But the fact
that tariffs are involved and could spark further tit-for-tat actions by
both sides clearly affected all markets Friday. The monthly Cattle on
Feed report released Friday afternoon was uneventful in terms of the
total cattle on feed. Unchanged numbers from a year ago indicate a
steady level. The combination of higher marketings and lower placements
in July is helping to tighten overall supplies through the summer
months. Beef cut-outs: lower, down $3.20 (select, $212.71) to down $1.76
(choice, $237.52) with light demand and offerings, 77 loads (37 loads
of choice cuts, 18 loads of select cuts, no loads of trimmings, 22 loads
of coarse grinds).
MONDAY'S CASH CATTLE CALL: Steady to lower.
Monday's cash market activity is expected to remain subdued with
showlist distribution and inventory-taking the main focus through day. A
weak market tone is hovering over the complex, likely limiting
additional short-term support.
FEEDER CATTLE: Futures closed $1.05 to $3.17
lower. The focus was on Thursday's Cattle on Feed report where beef
inventory in July increased 12% from June, highlighting the need to
clear additional product in the near future. Even though year-to-year
supplies are running significantly lower, the concern is that summer
buying trends in July and market volatility has changed buying patterns.
Following closing bell, the Aug. 1 Cattle on Feed report showed cattle
placements in feedyards fell 2% from a year ago. This is expected to be
supportive to the complex early next week, but it is uncertain if it
will outweigh the bearish market shift seen Friday. CME cash feeder
index for 8/22 is $139.72, down $0.17.
LEAN HOGS: Futures closed $1.05 to $3.00 lower.
Lean hog futures posted sharp late-week losses as nearby contracts
started a freefall and quickly broke through support levels seen over
the last week. That led to widespread panic selling across the complex.
The October futures contract posted limit a loss of $3 per cwt
midmorning, limiting any additional trade in spot futures and helping to
keep other contracts from posting further big losses. Friday's losses
will trigger expanded trading limits Monday, which will allow prices to
swing $4.50 per cwt. However, with prices under $60 per cwt, there
remains limited pressure to the downside. But with the weak fundamental
and technical holding in the market, it is unlikely that renewed support
will be evident. Pork cutouts continued lower as moderate gains in most
primals were offset by sharp losses in rib cuts. Pork cutout values
fell $0.29 per cwt, moving to $79.65 per cwt on 180 loads. CME cash lean
index for 8/21 is $77.04, down $0.36. DTN Projected lean index for 8/22
is $75.94, down $1.10.
MONDAY'S CASH HOG CALL: Steady to $2 lower.
Continued pressure is expected given the underlying bearishness in not
only hog futures, but most markets. Although packers will still need
large hog numbers to fill expected procurement levels, the focus will be
on weaker market trends. Monday slaughter numbers are expected at
475,000 head.
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