GENERAL COMMENTS:
All livestock futures are higher Wednesday morning as traders not only reverse the losses of Tuesday, but in the case of feeder cattle contracts, are focused on testing last week's highs. If current gains are held through the end of the session it will help bolster further activity at the end of the week and could place more emphasis on technical support developing across the cattle complex. Hog futures are lightly traded, but the ability to post uniform gains across the complex is adding some needed market support. December corn is up 1 1/2 cent per bushel and December soybean meal is down $1.30 per ton. The Dow Jones Industrial Average is down 35 points.
LIVE CATTLE:
August live cattle futures shifted higher following support in the October contracts. August futures are $0.75 higher at $124.05 at midday. October futures are posting triple-digit gains, helping solidify market support and creating momentum for the rest of the complex. October futures are $1.07 hundredweight (cwt) higher at $129.20 cwt. A move above $129 is fundamentally significant as this puts prices within 80 cents of contract highs. December futures, on the other hand, have set contract highs during morning trade, although traders are anxiously watching to see if these gains will be able to hold through closing bell. Cash cattle interest is slowly improving; more activity from packers is expected as the day continues. A few sales were reported in Nebraska at $200 dressed and $127 live. These prices are generally $2 cwt higher than last week's average; however, it also needs to be noted that these cattle are slated for delivery between Aug. 30 and Sept. 13. Bids are not yet surfacing in the South but we should see at least light interest before the end of the day. Asking prices are around $123 to $124 cwt in the South and $202 live basis in the North. Both sides are actively focused on how Friday's Cattle on Feed report may impact prices. The Fed Cattle Exchange Auction on Wednesday listed a total of 3,011 head; 1,328 sold; 76 were scratched from the auction; and 1,607 head were listed as unsold, as they did not meet the reserve prices, that ranged from $120 to $125. Opening prices ranged from $120 to $121, high bids ranged from $121 to $123. The state-by-state breakdown looks like this: Texas 2,863 total head, with 1,292 head sold at $121 to $122, and 1,571 head went unsold; Kansas 148 total head, with 36 head sold at $123, 36 head unsold and 76 were scratched from the auction.
Wednesday's morning's boxed beef prices are higher with choice cuts up $2.24 at $340.30 and selects up $0.73 at $307.50 on a total count of 80 loads. Even though prices have moved firmly higher, the shift away from aggressive daily swings is bringing more confidence and volume into the boxed beef trade. Boxed beef loads have doubled from early week activity levels, as more loads gives confidence to traders that price shifts are more realistic and likely sustainable. Dow Jones estimated Wednesday's cattle slaughter at 121,000 -- 1,000 higher than a week ago.
FEEDER CATTLE:
Feeder cattle futures are the bright spot of the livestock complex early Wednesday morning with triple-digit gains in August through November contracts. Despite narrow gains in corn Wednesday morning, traders have focused on the underlying support across the cattle complex. Early expectations for lower feeder cattle placements in July on the upcoming Cattle on Feed report have helped boost market momentum. Analyst estimates for total July placements are listed at 93.2% year ago levels. The percentage drop will get attention but may not be seen significantly bullish based on the extremely large placement levels during July 2020. This is an example how percentage changes sometimes don't tell the entire story. August futures are $1.37 cwt higher, and September contracts are $1.80 higher trading at $162.77 cwt. Feeder cattle cash prices are "unevenly steady" in several reported sales over the last couple of days. With prices generally within a range of $3 lower to $2 cwt higher from week ago levels, the expectation is that moderate to strong demand continues, but buyers are unwilling to aggressively push prices higher at this point. Following placement totals seen in Friday's report, it will give us a better indication as to how many cattle were pulled forward earlier in the year. This could add support to feeder cattle prices as numbers potentially dwindle during the fall and winter months. The CME Feeder Index was priced at $154.91 for Aug. 16.
LEAN HOGS:
October lean hog futures have led the lean hog contracts higher, offsetting a portion of Tuesday's market softness. Spot contacts are holding $0.67 gains, trading at $88.37 cwt at midmorning. Lean hog futures still remain well below recent August highs set early in the month, but the continued buyer interest moving into the complex continues to add support through nearby and deferred contracts. October futures have not moved $5 cwt higher off recent lows set last week. This is keeping prices well within the current market range, but the ability to move to the top half of this range is significant. Traders are focusing on processing level stability through the last couple of weeks, which should further support underlying buyer interest ahead of the holiday weekend. Pork primal prices continue to move higher with the most aggressive support once again seen in ham, picnic and belly cuts. Cutouts were up $3.27 at $121.39 Tuesday morning on 185.82 loads. Negotiated hog prices are $1.85 cwt higher with a weighted average price of $97.13 cwt on 7,427 head on the National Direct Morning Hog Report. The swine/pork market formula price is listed at $106.06 cwt. Dow Jones estimated Wednesday's hog slaughter at 476,000 -- 1,000 above a week ago, while 1,000 less than year ago levels. The CME Lean Hog Index is estimated at $109.17 for Aug. 17.
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