GENERAL COMMENTS:
Trade attention has moved back to the live cattle complex Tuesday morning with traders focusing on light-to-moderate gains in all nearby live cattle futures. The focus has moved away from outside market shifts in hog and grain market trade and back to the potential for higher beef values to draw renewed interest into the cattle market. Fall and winter contracts are holding 20- to 60-cent gains at midday, although the inability for traders to show much interest in early 2022 contract months is somewhat disappointing. Hog futures are nowhere near expanded trade limits, which is creating a sense of relief, but prices are still pushing lower as nearby contracts are testing long-term support. Feeder cattle trade remains extremely lightly traded, which may limit price shifts through most of the session. December corn is down 3 cents per bushel, and December soybean meal is down $1.80 per ton. The Dow Jones Industrial Average is up 138 points.
LIVE CATTLE
October live cattle are trading up $0.25 at $127.75, Live cattle futures are trading higher in nearby contracts Tuesday morning. Although gains are limited to August through December contracts, the focus on following the lead of higher boxed beef values is creating some much-needed support within the live cattle market. At this point, it is uncertain just how much follow through will be seen in cash values due to the higher futures and beef values, as August live cattle contracts are nearly steady with current live cash asking prices. The expectation that additional long-term premiums will be built into the complex over the coming months as December contracts are holding a $10-per-cwt premium to August, and February contracts are $10 higher than October futures. The ability to maintain these premiums creates underlying hope for late-year price support. Cash cattle interest remains subdued with packers showing little interest in stepping into the market early. With light trade last week, some thought that packers may become more aggressive than usual through the first half of the week. But, at this point, it appears that cash cattle trade may follow a more normal trading pattern. Bids are undeveloped through the morning, although asking prices in the South are starting to develop at $123 to $124 per cwt, while Northern bids are hard to pin down. With the WASDE report being released Thursday morning, it is likely that trade may develop after the report is released and reviewed.
Tuesday morning's boxed beef prices are higher with choice cuts up $4.66 at $304.46 and selects up $2.29 at $283.10 on a total count of 74 loads. The ability for boxed beef to continue to surge higher is incredible, now pushing choice cuts above $300 per cwt. Dow Jones estimated Tuesday's cattle slaughter at 120,000, steady with a week ago.
FEEDER CATTLE
September feeders are trading down $0.22 at $162.97, with limited moves seen Tuesday morning. The narrow-to-moderate gains in nearby live cattle futures and pressure in corn trade during morning trade has had a limited impact on the feeder cattle complex. With September through November feeder cattle futures trading at $163 to $167 per cwt, there is the potential to spark some light-to-moderate short-term support based on expected supply changes and current feeding costs. But these prices remain well within the current market range, which would likely limit technical market shifts based on the currently wide price boundaries set over the last month. For example, the September contracts established lows of $157.77 to highs of $164.82 during the month of July. The focus will continue to be on increased feeder cattle sales at regional and national auctions through the week. Indications of early sales point to mixed price movement with firmness seen on heavier-weight cattle compared to week-ago levels. The CME Feeder Index was priced at $156.30 for Aug. 6.
LEAN HOGS
The soon-to-expire August lean hog contracts has gained moderate support, trading near $110 per cwt Tuesday morning. But the rest of the complex remains under pressure. The August contact will cash settle at the end of the week to the CME index price, which is the main reason for the price adjustments through the week as traders try to adjust positions in front of settlement procedures. But the underlying pressure other futures trade is focusing on is the concern that overall pork cutout values may continue to show weakness through the end of the summer. October and December futures seem to have no inclination to test expanded trading limits with losses of $1 to $1.75 per cwt, but the moves lower are coming close to long-term summer support price levels. A move below June lows in either or the nearby contracts would likely spark enough round of widespread liquidation in lean hog futures prices. A strong rebound in belly cuts Tuesday morning sparked a triple-digit gain in carcass values in the morning cutout report. Cutouts were up $3.75 at $127.99 Tuesday on 210.93 loads, as belly cuts surged $21.46 per cwt. In order for this momentum to be sustained, strong gains are needed to hold through the rest of the day and reported in the afternoon pork cutout report. Negotiated hog prices are lower on the National Direct Morning Hog Report, down $0.06 with a weighted average of $98.40. The national weighted average of the Swine/Pork Market Formula is $108.83. Dow Jones estimated Tuesday's hog slaughter at 470,000, steady with a week ago. The CME Lean Hog Index is estimated at $110.77 for Aug. 7.
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