GENERAL COMMENTS:
Firm gains are seen Wednesday morning as traders try to adjust positions following the moderate to strong price reductions seen over the last two days. With traders now into the month of September, short covering in all markets is starting to redevelop. Nearby contracts are showing the most significant support, with triple-digit gains seen in lean hog and feeder cattle futures midday. Light trade is expected to be seen through the entire week, ahead of the long holiday weekend. Prices may continue to shift in a moderate range as traders allow price levels to bounce around within the current trading range. Very little short-term fundamental shifts are expected, but the focus will continue be placed on outside commodity market moves, and the ability for pork and beef prices to sustain current levels after the holiday break. December corn is down 12 cents per bushel and December soybean meal is down $2.70 per ton. The Dow Jones Industrial Average is down 37 points.
LIVE CATTLE:
Firm early buyer support moved into live cattle futures Wednesday morning. With very little significant short-term change expected in boxed beef values or market-ready cattle, traders are focusing on covering positions after early week losses. The most recent market shift has moved spot month October contracts below the 40-day moving average, but still positioned well above the 100-day moving average. With August contracts expiring at the end of the month, October contracts will be the point of reference for nearby traders over the next couple of weeks. There will likely be even more emphasis on December and February contracts, which are holding firm premiums to spot contracts and is creating optimism that this is where the market is heading over the upcoming weeks and months. Cash cattle trade is starting to develop in the South with a few deals in Kansas and Texas reported at $124 per cwt. These price levels are $1 to $1.50 per cwt higher than last week's average, although asking prices on cattle are still at $125 per cwt or higher. Interest in the North remains quiet with bids and asking prices undeveloped. More packer interest is expected to be seen as the day continues, but the bulk of trade may be delayed until sometime Thursday. The Fed Cattle Exchange Auction today listed a total of 5,029 head, of which 1,590 actually sold, 791 were scratched from the auction and 2,648 head were listed as unsold, as they did not meet the reserve prices that ranged from $123 to $124. Opening prices ranged from $121 to $122, high bids ranged from $122 to $124.25. The state-by-state breakdown looks like this: Texas 4,500 total head, with 1,590 head sold at $122 to $124.25 (of those sold one lot of 245 were from Mexico), 2,119 head unsold and 791 were scratched from the auction; Kansas 340 total head, all of which went unsold; Oklahoma 189 total head, all of which went unsold.
Wednesday morning's boxed beef prices are lower in light trade, with choice cuts $1.54 lower at $340.58 and selects down $0.24 at $311.79 on a total count of 54 loads. Dow Jones estimated Wednesday's cattle slaughter at 121,000, up 1,000 from a week ago and 5,000 higher than year ago levels.
FEEDER CATTLE
Sharp losses in grain trade has once again helped spark moderate to firm buyer support in feeder cattle trade. The interest in grain market prices has been fickle to say the least, as sharp corn market losses Tuesday had no positive impact on feeder cattle prices based on pressure in most other commodity and live cattle trade. Wednesday's widespread move higher in live cattle and hog markets has helped lend even more support to the feeder cattle complex as trades look for underlying beef market support as well as lower production costs over the upcoming weeks and months. Cash feeder cattle trade remains unevenly steady at the weekly Oklahoma City auction report. The focus on regional support and volatility in grain trade continues to keep buyers interested but has tempered upward price support heading into the holiday weekend. The CME Feeder Cattle Index was priced at $159.54 for Aug. 30.
LEAN HOGS
October lean hog futures have rebounded Wednesday morning, offsetting most of the triple-digit losses seen Tuesday and creating further underlying support across all nearby and deferred contracts. Moving into a fresh month as the calendar rolled to September overnight has likely created renewed optimism through the complex, even though very little fundamental or technical changes can be expected in the short term. Cutouts are down $2.95 at $106.06 Wednesday morning on 129.67 loads. Negotiated hog prices are 3.18 lower per cwt with a weighted average price of $88.30 per cwt on 2,961 head on the National Direct Morning Hog Report. The swine/pork market formula price is listed at $98.97 per cwt. Dow Jones estimated Wednesday's hog slaughter at 477,000, 1,000 higher than a week ago, while 1,000 higher than year ago levels. The CME Lean Hog Index is estimated at $102.67 for Aug. 31.
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