GENERAL COMMENTS:
Lean hog futures closed higher Friday for the
second consecutive trading day in a row. Positive news about China
suspending additional tariffs on U.S. soybeans and pork raised hopes for
increased pork trade in the near future. Early cattle gains eroded as
traders focused on position-taking at the end of the week, although the
market continued its positive direction. From Friday to Friday,
livestock futures scored the following changes: Oct live cattle, up
$3.20; Dec live cattle, up $4.63; Sep feeder cattle, up $3.15; Oct
feeder cattle, up $3.67; Oct lean hogs, up $2.97; and Dec lean hogs, up
$6.23. Additional cash cattle trade was seen Friday morning in Kansas at
$100 per cwt. Although these prices are $1 per cwt higher than
Thursday's trade, the market appears steady with last week. Limited Iowa
live trade was seen at $104 per cwt, although this was reported for
delayed delivery. A few afternoon sales are also being picked up in
Nebraska at $101 live basis. Bids of $99 to $100 per cwt live and $159
to $160 were seen in Nebraska Friday afternoon. Although the reported
numbers appear to be light for the week, most trade appears to be done
for the week. Cattle on showlists may be willingly kept back to put onto
next week's showlists, given that strong futures gains were unable to
muster cash market support. The National Daily Direct afternoon hog
report was $0.64 lower ($44-$51, weighted average $46.67) on 11,770
head. Corn prices inched higher Friday with December closing up 1 1/2
cents. Stock markets were mixed in light trade with Dow Jones 27 points
higher and the NASDAQ down 24 points.
LIVE CATTLE:
Futures closed $0.32 higher to $0.65 lower. All
active traded live cattle contracts eroded late Friday due to limited
end-of-week volume and traders moving away from establishing market
direction and instead focusing on position-taking. December live cattle
rallied $5.78 per cwt during the Wednesday and Thursday trading
sessions, creating an opportunity for traders to adjust positions at the
end of the week. At this point, the moderate price pressure is not
expected to change the firming market structure, but traders remain
cautious given pressure in cash trade and recent softness in beef
values. Beef cutouts: steady to higher, unchanged (select, $198.60) and
up $0.91 (choice, $220.88) with moderate demand and offerings, 127 loads
(56 loads of choice cuts, 30 loads of select cuts, 17 loads of
trimmings, 23 loads of coarse grinds).
MONDAY'S CASH CATTLE CALL:
Steady. Following what light-to-moderate trade
through the week, packers and feeders are expected to regroup early next
week. However, early week business is expected to be limited to
showlist distribution and inventory taking.
FEEDER CATTLE:
Futures closed $0.35 lower to $0.32 higher.
Early gains Friday morning led to limited buyer interest with traders
seeing little change in the direction of the complex following technical
market signals midweek. The triple-digit rally in all nearby cattle
futures over the previous two days created a great opportunity for
end-of-the-week position-taking in Friday's limited-volume trade.
Traders continue to focus on the recent support through the entire
cattle complex, but remain extremely cautious given still-large numbers
of market-ready live cattle to move through the system. This is causing
some concern that recent gains may not hold over the next few weeks. CME
cash feeder index for 9/12 is $136.09, down $0.56.
LEAN HOGS:
Futures closed $0.50 to $4.50 higher. Nearby
lean hog futures took full advantage of expanded trading limits Friday,
with December and February contracts rising $4.50 per cwt early in the
session and holding on to those gains through closing bell. This move
will allow for expanded trading limits of $4.50 per cwt in Monday's
session as well, potentially creating support through the entire lean
hog complex. The October contract settled at $66.47 per cwt following a
$3.30-per-cwt rally, while the December contract closed at $68.70 per
cwt. With this move, prices blew through previous August and September
highs, trading at the highest levels since late July. An announcement
that China would suspend additional tariffs on U.S. pork ahead of the
planned trade talks between the two countries helped boost expectations
that China will eventually step back into the market to buy more pork.
Although this news is bullish for hogs, it is important to remember that
a lot can happen between now and the planned October trade talks. Pork
cutouts fell sharply following pressure in butt, rib and belly cuts.
Pork cutout values fell $2.26 per cwt, moving to $68.21 per cwt on 256
loads. CME cash lean index for 9/11 is $60.69, down $1.16. DTN Projected
lean index for 9/12 is $59.71, down $0.98.
MONDAY'S CASH HOG CALL:
Steady to $1.50 lower. Firm pressure is expected
to redevelop early next week as packers continue to focus on what seems
to be an unending supply of hogs available through mid-September. Most
bids are expected steady to $1 per cwt lower Monday morning. Monday
slaughter numbers are expected at 482,000 head.
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