GENERAL COMMENTS:
Cattle traders quickly picked up Monday where they left off Friday afternoon as the Cattle on Feed report confirmed the lower placements and on feed numbers expected before the report. Nearby live cattle and feeder cattle futures set new contract highs Monday; traders continued to focus on potential support based on short- and long-term beef supply levels. Hog futures struggled during the last half of the trading session. Although early support trickled into the hog complex from the cattle market, weaker morning reports dashed any bullish market tone, causing contracts to close mixed in narrow to moderate trading ranges. Hog prices closed lower on the National Direct Afternoon Hog Report in moderate trade, down $3.72 with a weighted average of $92.68 on 6,398 head. December corn is down 1 1/2 cent per bushel and December soybean meal is down $7.20 per ton. The Dow Jones Industrial Average is up 215 points and NASDAQ is up 227 points.
LIVE CATTLE:
Aggressive gains flooded into live cattle futures Monday. Although traders were unable to hold session highs at the close, nearby contracts still posted new contract highs in several months. The above $131 per cwt in October not only helped spark follow-through buyer support, but the ability to string two strong positive closes in consecutive sessions has quickly changed the mentality of the cattle market. It is uncertain if active buyer support will redevelop before traders see the need to take profits; but upward market support is possible given tighter on feed supplies. Beef in cold storage is fractionally changed from month ago levels, listed still at 100% of June's level. This is not likely to spark active support, but it is not discouraging either. August live cattle closed $2.17 higher at $126.45, October live cattle closed $2.90 higher at $131.95 and December live cattle closed $2.30 higher at $136.82. Cash cattle markets are untested and quiet Monday afternoon with bids and asking prices still not widely available. It is expected that when asking prices are seen, they will be significantly firmer given the support in beef and futures prices. But it is uncertain just how active packers will be over the next couple weeks. With Labor Day weekend quickly approaching, the focus on September procurement needs is starting to take shape.
Friday's slaughter is estimated at 116,000 head -- steady with a week ago and 1,000 head less than a year ago. Week-to-date totals are listed at 595,000 head -- 13,000 more than week ago levels and 9,000 ahead year ago totals.
Boxed beef prices closed higher: choice up $2.97 ($348.03) and select up $0.87 ($319.40) with a movement of 83 loads (39.99 loads of choice, 15.54 loads of select, 10.64 loads of trim and 16.59 loads of ground beef).
TUESDAY'S CASH CATTLE CALL:
Steady. Cash market interest remains dead Monday and will likely see very little interest from either side right away Tuesday morning. Asking prices will likely firm significantly through the week.
FEEDER CATTLE:
Active triple-digit gains in feeder cattle futures helped to drive additional support through the complex. Although August contracts were lightly traded and closed lower, this is not unexpected as August feeder prices are starting to adjust to the CME index price. The ability to push September and October contracts to new contract highs, with October futures moving above $170 per cwt, continues to draw buyers back into the complex. Traders look at lower-than-expected placement numbers in July as continued support for tighter supplies not only in nearby but deferred contracts. This will continue to showcase the lighter calf crop well into next year, hopefully sparking even more support over the coming days and weeks. August feeders closed $0.82 lower at $158.20 September feeders closed $1.80 higher at $167.30 and October feeders closed $3.05 higher at $170.67. The CME Feeder Cattle Index 8/20/2021: down $0.06, $155.73.
LEAN HOGS:
October lean hog futures took the brunt of market pressure Monday with triple-digit losses limited to the spot month. The rest of the complex remains much more subdued with prices hovering from 30 cents lower to 35 cents higher. Strong buying in cattle seems to be helping drive additional support to deferred contract months, although the underlying weakness in nearby futures was the main focus of most traders and attributed to the majority of trade volume. July's Cold Storage report released Monday afternoon will likely create even more uncertainty through the hog complex. This may not cause directional changes but could create increased price volatility within the current but sideways trading pattern. Total pork supplies were essentially unchanged, at 100% of last month's levels. Pork in cold storage is 4% below year ago levels, but this is to be expected given the challenges seen in 2020. The biggest challenge will be how traders asses pork cut changes with belly stocks falling 24% from June levels, while bone-in hams increased 23%. This could add further price shift to cuts over the next couple of weeks. October lean hogs closed $1.15 lower at $87.47, December lean hogs closed $0.30 lower at $81.40, and February lean hog futures closed $0.02 lower at $84.07. Pork prices tumbled lower in active pressure in ham and belly cuts. Pork cutouts totaled 365.04 loads with 336.17 loads of pork cutouts and 28.87 loads of trim. Pork cutout values: down $6.00, $113.26. Monday's slaughter is estimated at 456,000 head -- 19,000 head below a week ago and down 14,000 from a year ago. The CME Lean Hog Index 8/20/2021: up $0.34, $107.90.
TUESDAY'S CASH HOG CALL:
Steady to $1 lower. Early weakness in Monday morning's cash hog and pork cutout reports could add further softness to packer bids Tuesday. Although aggressive market shifts are not expected in either procurement levels or changes in short-term supplies, packers may be able to minimize spending during the first half of the week.
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