Monday, August 31, 2020
Friday, August 28, 2020
It was week of lower prices for the livestock complex as traders ran from topping charts and cash cattle sellers were left to simply take what they were offered or not sell. Hog prices closed higher on the National Direct Afternoon Hog Report, up $0.24 with a weighted average of $42.89 on 4,800 head. December corn is up 3/4 cent per bushel and December soybean meal is up $6.60. The Dow Jones Industrial Average is up 161.60 points and NASDAQ is up 70.29 points.
From Friday to Friday livestock futures scored the following changes:
Aug LC off $2.57 Oct LC off $3.65; Sep FC off $2.90 Oct FC off $5.10;
Oct LH off $0.60 Dec LH off $0.25.
Watching this week's live cattle futures trade was brutal. It's amazing how quickly the ground the market built itself up upon can crater and send the complex sharply lower in a matter of one day. The maddening piece about this whole equation is looking at the remaining time of 2020 and wondering what the market has in store. Cash cattle prices are scarcely lower and with the remaining 2020 contracts dancing from $103 to $108, there's hardly any room for lower trade in order to keep contracts above $100. It's true the industry has done a good job of cleaning up the backlog, but cattle are still packing extra weight which adds additional tonnage to the marketplace that retailers have to move. Though the market has worked its way out of the hole made earlier this spring, there's still a lot of unknowns.
Live cattle contracts traded lower into Friday's close as traders veered away from the market, unwilling to invest when there's downward pressure. October live cattle closed $1.25 lower at $104.90, December live cattle closed $0.85 lower at $108.50 and February live cattle closed $0.85 lower at $111.85. This week's cash cattle trade was fully lower and actually traded lower as the week progressed. Live trade this week ranged from $103 to $105, and dressed trade was for $165 to $166. Friday's slaughter is estimated at 116,000 head -- steady with a week ago and 1,000 head less than a year ago. Saturday's slaughter is projected to be 66,000 head.
Boxed beef prices closed mixed: choice down $2.14 ($229.40) and select down $0.60 ($214.86) with a movement of 114 loads (72.52 loads of choice, 11.67 loads of select, 19.99 loads of trim and 10.29 loads of ground beef).
MONDAY'S CASH CATTLE CALL: Lower. With packers sitting on a large supply of cattle and with boxed beef prices starting to top, they are going to be adamant about buying cattle cheaper.
Feeder cattle contracts closed the week considerably lower with technical pressure giving the market no other option but to scale lower. September feeders closed $1.20 lower at $140.02, October feeders closed $0.97 lower at $140.17 and November feeders closed $1.00 lower at $140.60. Unfortunately, the market may not see much support in the near future as boxed beef prices begin to top and there's weakness in the live cattle market. Thankfully there are a couple of weeks to buy the market some time before the big feeder cattle run; at that point, hopefully, the market will be in a position again to honor upward momentum. Earlier this week, Northern Livestock Video Auction hosted their Early Fall Preview and compared to their sale earlier this summer prices held phenomenally well considering this week's board was substantially weaker and the cash cattle market turned lower for the first time in roughly two months. For the lighter weight divisions prices were $1.00 softer but overall, the sale highly commendable. Steers weighing 500 to 549 pounds sold on average for $165, steers weighing 600 to 649 pounds sold for $155.20, steers weighing 650 to 699 pounds sold for $150.96 and steers weighing 700 to 749 pounds sold for $149.96. The CME feeder cattle index 8/27/2020: down $1.46, $141.56.
Out of all the livestock contracts the lean hog complex had the most going for it this week as the market was able to close with some major cash and even close a couple of days fully higher while both of the cattle contracts dodged lower. But as the week traded, support for the lean hog complex dwindled and ultimately sent the spot lean hog contract back below its $55.00 resistance level. October lean hogs closed $2.07 lower at $53.65, December lean hogs closed $1.37 lower at $55.20 and February lean hogs closed $0.87 lower at $61.97. Pork cutouts total 333.33 loads with 297.69 loads of pork cuts and 35.64 loads of trim. Pork cutout values: down $1.39, $71.39. Friday's slaughter is estimated at 481,000 head - 5,000 head more than a week ago and 6,000 head more than a year ago. Saturday's slaughter is projected to be 276,000 head. Thursday's hog slaughter was revised to 472,000 head. The CME lean hog index 8/26/2020: up $0.26, $57.12.
MONDAY'S CASH HOG CALL: Steady to slightly lower. You've got to hand it to the market this week as the lean hog complex was able to close higher more often than lower but as the market heads into next week, packers may not be as aggressive as the hype from Labor-Day buying subsides.
Feeling more like a Monday than a typical Friday, the livestock complex is left trading considerably lower into the afternoon hours. Earlier this week the cattle contracts were feeling all the pressure but as time has evolved the lean hog complex isn't feeling support by any means as the spot October contract falls $2.00 lower. October lean hogs are down $2.10 at $53.625, December corn is down 1 cent per bushel and December soybean meal is up $5.40. The Dow Jones Industrial Average is up 106.54 points and NASDAQ is up 56.73 points.
Friday's live cattle trade has been nothing short of depressing as the complex continues to fall lower. As nearby contracts range from $102 to $104, cash cattle trade could be worrisome over the next couple of weeks as packers sit on a large inventory and the board builds with bearish chatter. October live cattle are down $1.47 at $104.65, December live cattle are down $1.10 at $108.22 and February live cattle are down $1.00 at $111.70. The cash cattle market hasn't been the breath of fresh air the industry would gladly welcome but instead the markets held out to be quiet through Friday's morning trade. Packers are putting feelers out throughout the feeding regions to see what's still for sale and who's willing to sell, but thus far trade has been extremely quiet.
Boxed beef prices are higher: choice up $0.34 ($231.88) and select up $1.45 ($215.71) with a movement of 55 loads (23.54 loads of choice, 9.59 loads of select, 15.14 loads of trim and 6.54 loads of ground beef).
The feeder cattle complex would love to keep trading higher as cattle buyers have progressively moved the market higher week after week, but the lack of support from technical traders leaves the market scaling lower and lessens buyer's confidence. September feeder cattle are down $1.15 at $140.07, October feeder cattle are down $0.85 at $140.30 and November feeder are down $0.95 at $140.65. Unfortunately, the downward pressure just continues to build and with cash cattle trade weakening, the market's near future could be a lot of lower moves.
Friday has been a total let down for the lean hog complex as the market fought diligently to surpass the resistance at $55.00 but as the bearish outlook has rooted its core into the heart of the livestock complex, the lean hog complex has fallen lower. October lean hogs are down $1.95 at $53.77, December lean hogs are down $1.30 at $55.27 and February lean hogs are down $0.67 at $62.17. With trade already winding down for the weekend, there's little hope that the market will rally into the afternoon and close higher.
The projected lean hog index for 8/27/2020 is down $0.07 at $57.05, and the actual index for 8/26/2020 is up $0.26 at $57.12. Hog prices are higher on the National Direct Morning Hog Report, up $0.41 with a weighted average of $43.06, ranging from $38.00 to $43.37 on 4,483 head and a five-day rolling average of $41.71. Pork cutouts total 222.77 loads with 198.89 loads of pork cuts and 23.88 loads of trim. Pork cutout values: down $0.24, $72.54.
Cash cattle trade through the week has not only been limited and hard to pin down, but overall disappointing given the firm market support over the last couple of months. Prices have continued to erode through the week, posting prices near $104 per cwt in the South on a live basis Thursday, down from $105 per cwt earlier this week and $106 per cwt last week. Limited sales in the North were reported at $165 to $168 per cwt. This is weaker than both last week and trade earlier this week, although it is expected that additional trade is still needed to develop, especially in the North. There is uncertainty over how much short-term market pressure will develop, and if feeders will hold out at the end of the week, hoping for additional support next week. The concern about waiting is that limited activity is expected next week in both cash cattle trade and futures markets leading into the Labor Day weekend. Most of the holiday needs are expected to have already been sourced, creating potential additional pressure both before and after the holiday weekend. This limited timeframe is also one of the main drivers in live cattle price pressure as traders look for increased softness to develop over the next few weeks, in a typical seasonal end-of-summer pattern. Feeder cattle futures appear to have clearly moved past seasonal summer highs as October futures have fallen $8 per cwt the last two weeks. This potential weakness has been expected and talked about over the past month as feeder cattle futures typically peak in late July or early August. Feeder cattle futures peaking two to three weeks later than usual is no significant surprise, given the delayed market activity through the spring and summer.
Mixed trade is expected to develop in lean hog futures Friday. The ability to regain early week pressure and test short-term resistance levels in nearby lean hog contracts is impressive and can be partially attributed to traders fleeing the cattle market, looking for refuge in the lean hog complex. Traditionally the lean hog futures complex has been anything but a "refuge" for traders, but given the seasonal pressure in cattle markets as well as the underperforming nature of hog trade through the entire summer, the hog complex seems like the safest and most underbought market at this point. Given this renewed pressure, there still needs to be caution given to bullish traders who may expect strong market support, as current hog market fundamentals may limit the upside movement in the complex over the next several months. This could quickly allow for traders to jump in and out of the market in the near future. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Friday is expected at 482,000 head. Saturday runs are expected at 277,000.
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Boxed beef values continue to slowly but steadily churn higher through the week. The expectation that firm buyer support may continue could help to sustain additional gains through the end of the week.
Active pressure was seen in live and feeder cattle futures during the week. This continues to point to seasonal pressure surrounding and following Labor Day, which traditionally signals a pullback in price levels. The focus now will move to just how much pressure will develop, and if the complex can regain significant support before the end of the year.
Spring 2021 live cattle contracts continue to hold a strong premium to nearby contracts. The focus on firming price levels during the first quarter of 2021 despite increased cattle placements points to expectations of beef demand recovery in the coming months.
Cash cattle trade has yet to become active, but prices have continued to erode through the week. This is expected to limit price support not only this week, but next week as packers and feeders look ahead to the Labor Day weekend.
Nearby lean hog futures continue to move to new short-term highs as traders slowly but steady move into hog futures as cattle markets shift lower. The ability to sustain further buyer support into September is expected to spark additional technical buyer support across the entire complex.
Despite the firmness in lean hog futures, continued large supplies of market-ready hogs are expected to limit aggressive price gains over the near future. This could keep nearby hog futures capped under $60 per cwt over the near future based on pork supply and uncertain demand growth.
Pork cutout values bounced higher Thursday. This has limited the concern that aggressive price pressure may develop in pork values and could bring additional end-of-the-week gains.
Concerns of further price pressure in pork cutout values is likely to limit overall market optimism during late August and early September.
Thursday, August 27, 2020
|BULL SIDE||BEAR SIDE|
Wednesday, August 26, 2020
Monday, August 24, 2020
Monday Morning Livestock Market Update - Increased Cattle Placements Set Tone for Further Cattle Weakness
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|1)||1)||Cattle placements in July landed at 111% year-ago levels. This is well above the trade estimate and the range of estimates. This will further curb market expectations through early 2021 as these cattle are expected to reach market weight during the first quarter of 2021.|