Wednesday Morning Livestock Market Summary - CME to Launch a Beef Trim Contract

GENERAL COMMENTS:

The June live cattle contract went off the board on a positive note Tuesday, settling at $258.20. The discount held by the August contract increased further on Tuesday and was about $16.00 below the June. This could point to strength as time moves forward and the cash market holds where it currently is. Some of the recent selling might have been due to it being the end of the month and the end of the quarter, as fund traders took some profits to close out their books. If that were the case, they may renew buying Wednesday. Cash cattle have not yet traded and may not trade Wednesday either. Boxed beef prices were mixed with choice up $1.72 and select down $2.50. CME will launch beef trim futures and options tied to 50% lean and 90% lean trim, the key inputs used to make ground beef, hamburgers and meatballs. It signals beef price volatility has become big enough that CME sees demand for a more precise risk-management product beyond live cattle and feeder cattle futures. The contract will begin on July 20.

Hog futures did not show much volatility Tuesday with traders finding little to move the market significantly. Futures have seen greater support in the nearby month and have developed a slight uptrend. Later contracts continue to remain in a sideways pattern. Packers have been more aggressive with the National Daily Direct Afternoon Hog report showing a gain of $4.14 on good volume. Packers wanted to purchase hogs early due to the upcoming holiday weekend. The aggressive buying may be finished with lower cash prices expected Wednesday. Unfortunately, pork cutout values declined $2.17.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have declined for three consecutive days. Now that it is a new month, traders may step back in to purchase more aggressively.	1)	With July 4 demand being met, beef prices may slide further as we move into the dog days of summer.
2)	The August live cattle contract continues to hold a large discount to cash. Futures may move higher to narrow the gap.	2)	Cattle futures may see further weakness as the market is not receiving continued bullish news.
3)	Nearby hog futures are trending higher as some near-term fundamentals may be showing positive signs.	3)	Later hog contracts have not been able to break out of the sideways trading pattern; a break below that level would trigger further selling.
4)	Cash hogs are showing increased support, with the weighted average on Tuesday moving to $97.58.	4)	Pork cutouts have not seen consistent support, which is needed for traders to turn bullish.