Wednesday Closing Livestock Market Summary - Cattle Bat Higher Prices

GENERAL COMMENTS:

Holidays come as bitter-sweet days for market participants as the shortened weeks throw off normal trade. Wednesday's trade was mostly uneventful other than the baffling bullishness that the cattle contracts are pushing. As a "Designated-Bear" (proudly coined by John Harrington), I'd love to believe that these higher prices aren't dangerously volatile, but knowing the raw facts of the industry's current make-up makes it hard to believe that this green close isn't far-fetched when fundamentally the math just doesn't add up. Hog prices closed higher on the National Direct Afternoon Hog Report, up $0.20 with a weighted average of $28.66 on 7,670 head. September corn is up 9 cents per bushel and December soybean meal is up $8.70. The Dow Jones Industrial Average is down 77.91 points and NASDAQ is up 95.86 points.

LIVE CATTLE:

The live cattle market closed higher (notably higher in most contracts) and continues to discount the bearish factors of the market. As Southern live cattle prices dance below the $100 market, and as corn prices start to bounce off recent lows, the market leaves many producers skeptical and not understanding where this bullish mindset is coming from. August live cattle closed $1.02 higher at $97.30, October live cattle closed $0.95 higher at $100.67 and December live cattle closed $0.85 higher at $104.50. Cash cattle trade came in through the day in bits and pieces where Southern cattle traded live for $92 to $96 and Northern cattle ranged from $152 to $155. Wednesday's slaughter is estimated at 121,000 head - 1,000 head more than a week ago and 1,000 head shy of a year ago.

Boxed beef price closed lower: choice down $1.59 ($205.38) and select down $1.47 ($198.43) with a movement of 193 loads (105.24 loads of choice, 27.27 loads of select, 18.15 loads of trim and 42.70 loads of ground beef).

THURSDAY'S CASH CATTLE CALL: Steady with the week's trend. Now that some Southern cattle have traded, the market will mostly likely wrap up the week trading within the parameters that have already been set, but could trickle a little lower too.

FEEDER CATTLE:

Feeder cattle contracts traded sharply lower into Wednesday's afternoon, but as the afternoon progressed, the feeder cattle contracts shot higher and closed $0.22 to $1.42 higher. Earlier in the day, the market was leery of the live cattle market's excitement as fundamentals scream for lower prices and the cash cattle market erodes, but yet live cattle contracts looked for higher ground and come Wednesday afternoon the feeder cattle market jumped on the bullish bandwagon. August feeders closed $0.22 higher at $133.07, September feeders closed $0.65 higher at $134.02 and October feeders closed $0.80 higher at $134.90.

The countryside continues to sell feeder cattle and calves exceptionally well despite looming fears of how the industry is going to process through the backlog of cattle and how long that may take. At Huss Livestock Market in Kearney, Nebraska, compared to two weeks ago, yearling steers sold $3.00 to $4.00 stronger and yearling heifers sold $2.00 stronger. Demand was good from start to finish and quality was marked as average. The CME feeder cattle index 6/30/2020: down $0.29, $129.13.

LEAN HOGS:

The lean hog contracts couldn't be budged with anything -- a stronger cash price nor a stronger cutout value could rally the industry higher through Wednesday and ultimately the market closed mostly lower. July lean hogs closed $0.37 lower at $44.80, August lean hogs closed $0.05 higher at $49.07 and October lean hogs closed $1.07 lower at $48.27. Pork cutouts totaled 368.52 loads with 324.71 loads of pork cuts and 43.80 loads of trim. Pork cutout values: up $0.50, $63.62. Wednesday's slaughter is estimated at 469,000 head, up 1,000 head from a week ago and 9,000 head less than a year ago. The CME lean hog index 6/29/2020: up $0.01, $45.24.

THURSDAY'S CASH HOG CALL: Steady. Seeing that the market's strength has carried over the last two days for the cash market leads one to believe that Thursday may be able to sneak higher prices out of the market as the week wraps up early for the Fourth of July holiday.

#completeherdhealth

Wednesday Midday Livestock Market Summary - Live Cattle Contracts in Denial & Feeder Cattle Contracts Depressed

General Comments

Midday live cattle contracts are trading mildly higher with the rest of the livestock complex trades lower. Cash trade has treated the lean hog market kindly as for a second day in row cash hogs are trading higher, but unfortunately the cash cattle market isn't celebrating the same news as prices continue to erode. September corn is up 8 1/4 cents per bushel and December soybean meal is up $8.50. The Dow Jones Industrial Average is up 62.09 points and NASDAQ is up 88.16 points.

LIVE CATTLE

Understanding the live cattle market when fundamentally understanding the challenges the industry is up against is truly baffling. Last week's data shared that carcass weights are 47 pounds over a year ago levels for steers, and 37 pounds over a year ago for heifers; we know that the back log of cattle still has to be processed through and concerns about beef demand through the third quarter are heightened - all of which should be bearish sediments but yet the board scales modestly higher. August live cattle are up $0.47 at $96.75, October live cattle are up $0.37 at $100.10 and December live cattle are up $0.12 at $103.77. Cash cattle trade has developed modestly throughout the countryside with Southern cattle selling for $95 live ($1.00 lower than last week) and northern cattle selling dressed for $153 to $155, which is mostly steady for the week. Asking prices remain firm at $98-plus in the South and $158 in the North for dressed cattle.

The Fed Cattle Exchange Auction listed a total of 1,814 head, with 144 actually sold, 1,352 head listed as unsold, and 318 head listed as PO (Passed Offer). The state by state breakdown looks like this: Kansas 1,155 total head, with 144 head sold at $95.00, 693 head unsold, 318 head listed as PO ($93.00); Nebraska 194 total head, with no cattle sold; Texas 465 total head, with no cattle sold. The delivery date/weighted averages breakdown is as listed: 1-9 day delivery: 768 head total, 144 head sold, with a weighted average price of $95.00; 1-17 day delivery 1,046 head total, with no sales.

Boxed beef prices are lower: choice down $1.38 ($205.59) and select down $0.44 ($199.46) with a movement of 115 loads (73.94 loads of choice cuts, 15.30 loads of select, 5.82 loads of trim and 19.65 loads of ground beef).

FEEDER CATTLE

Feeder cattle contracts are truly unimpressed with every notion that Wednesday has offered and insist on trading lower after seeing corn prices trading higher. Feeder cattle contracts are playing the field on a safer note when compared to the live cattle contracts as the industry isn't past the back log of cattle and cash cattle prices are going to only continue to erode through the summer. August feeders are down $1.37 at $131.47, September feeders are down $1.02 at $132.35 and October feeders are down $0.97 at $133.12.

LEAN HOGS

The lean hog complex has trades disappointingly Wednesday morning as the board tips lower while cash prices hit the midday report strong and cutout values post midday gains of over $1.00 stronger. July lean hogs are down $0.20 at $44.97, August lean hogs are up $0.40 at $49.42 and October lean hogs are down $1.05 at 48.35. Interest in pretty slim and given that the Thursday is the last trading day for this holiday shortened week, the complex may simply not have enough trade support and interest to rally.

The projected lean hog index for 6/30/2020 is up $0.03 at $45.27, and the actual index for 6/29/2020 is up $0.01 at $45.24. Hog prices are higher on the National Direct Morning Hog Report, up $0.23 with a weighted average of $28.69, ranging from $24.00 to $30.13 on 5,095 head and a five-day rolling average of $28.64. Pork cutouts total 230.63 loads with 204.33 loads of pork cuts and 26.30 loads of trim. Pork cutout values: up $1.18, $64.30.

#completeherdhealth

U.S. red meat production rebounds significantly

Beef slaughter reaches second-largest levels of 2020 in week ending June 27.

U.S. beef and pork production encountered significant challenges in April and May as COVID-19 outbreaks slowed or halted production. Further, many plants endured slowdowns as they implemented worker safety measures. This eventually led to some short-term meat shortages, raising concerns about available supplies. However, as U.S. Meat Export Federation (USMEF) president and chief executive officer Dan Halstrom explained, production has rebounded significantly in recent weeks, underscoring the U.S. industry's ability to serve both domestic and international customers.

“There has been a lot of work within the supply chain on enhancements and improvements in response to COVID-19 at the live production level, the slaughter plant level and the logistical infrastructure,” Halstrom said. “Consequently, we are seeing dramatic rebounds in our ability to supply our customers both in the U.S. and globally.”

Halstrom reported that U.S. cattle slaughter for the week ending June 27 was at 680,000 head, up 4% from the previous week and 1.5% above a year ago. Live cattle weights averaged 1,369 lb., up 50 lb. from last year.

“This is the second-largest weekly kill in 2020 for the beef side,” he noted. “So, you can see from a production standpoint, we’re seeing dramatic improvement.”

Hog slaughter was estimated at 2.64 million head, up 11% year over year and the fourth consecutive week above year-ago levels, with live weights up 8 lb. from a year ago to 291 lb.

From a product mix standpoint, Halstrom explained that domestic demand is different from export demand, with international customers often purchasing cuts and products that U.S. consumers typically don’t.

“An ideal scenario in a livestock production chain is to maximize the value in such a way that we leverage the robust domestic demand, complemented by the export markets. Consequently, this rebound underscores our ability to service reliably not only our domestic customers but our international customers as well,” he said.

#completeherdhealth

Wednesday Morning Livestock Market Summary - Grain Market Rally Adds to Livestock Uncertainty

General Comments:

It is hard to get a good handle on the cash cattle market going into Wednesday's trade with the development of wide trading ranges appearing as both sides gear up for the long holiday weekend. Northern dressed trade developed Tuesday in a much wider range than last week with prices from $148 to $155 per cwt. This is generally steady to $7 per cwt lower than last week's average, but the concern is whether further weakness in beef values and futures prices through midweek will add increased softness to cash trade during early July, which is creating some additional pressure. Moderate trade is expected to develop over the next couple of days with both sides wanting to wrap up any needed deals before Friday. Futures trade is expected mixed to mostly lower. The early support Tuesday was quickly eroded following surging grain market values following the USDA acreage report. The surprise pullback in corn acres was most obvious to not only the corn market, but also has significant impacts on overall feed and production costs through the end of the year. This will not only heavily impact overall live cattle trade, but the ability for feeder cattle to hold recent support, quickly sparked selling pressure through the entire complex. With further grain market support developing in overnight trade, the focus on adjusting overall cost of gain formulas is likely to limit any early-month support that may have otherwise moved into the cattle complex. Wednesday's slaughter is expected at 120,000 head.

Firm gains developing in lean hog futures trade is expected to carry light-to-moderate spillover buyer support as traders enter the month of July. The lean hog futures complex was able to quickly look past higher grain and feed prices during the day with traders more focused on end-of-the-month and quarter positioning. Even though August futures posted light-to-moderate support, the main support was seen in October through April contract months. Given the current structure of hog numbers and backlog of market-ready hogs through the rest of the summer, this price support correlates with a more stable supply level that could help to bring follow-through support through the upcoming days and weeks. Traders remain cautious, although at current price levels, there is a growing sentiment that prices are at or near market lows. Cash hog prices are expected $1 lower to 50 cents higher with most bids expected steady. Slaughter Wednesday is expected at 470,000 head. Friday slaughter is expected at 200,000 head. No Saturday runs are expected due to the Fourth of July holiday.

	BULL SIDE		BEAR SIDE
1)	The upcoming Fourth of July holiday weekend is expected to bring about increased beef demand. A strong boost in retail and food service movement over the weekend could not only help clear growing inventory levels but could become a springboard for buying through the upcoming weeks, potentially defying the traditional demand slump seen in late summer.	1)	Firm pressure developing in cash cattle trade through the week is starting to erode fundamental support with the current weaker trend moving cash values to a discount to nearby futures trade for the first time since the COVID-19 pandemic has disrupted the market. This could limit short-term support in cash and futures trade.
2)	With June live cattle futures expired, the focus on August contracts and the ability to sustain the sideways market trend in live cattle futures will likely spark renewed interest from commercial and noncommercial traders during early July.	2)	Concerns of further food service demand pressure is starting to develop, which will continue to heavily impact the beef market. Some states have reversed reopening procedures as COVID-19 cases are spiking over the last few days. This could quickly disrupt the growth in demand that has started to build.
3)	Strong triple-digit gains in deferred lean hog futures as traders roll out of the month of June, and third quarter gives an indication that traders expect further market support to develop in the near future.	3)	Sharp triple-digit losses in pork cutout values Tuesday adds to the overall softness in the pork market. Concern that pork demand will continue to be more sensitive to added restrictions in several states as coronavirus cases are spiking once again.
4)	Cash hog trade started to stabilize despite the reduced processing levels this week. This could help to establish more market negotiations for market-ready hogs during the upcoming weeks.	4)	Limited packer activity expected over the holiday weekend with no Saturday slaughter expected, and Friday and Monday schedules expected to be reduced. This will greatly reduce the overall number of hogs slaughtered this week.

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