Tuesday Morning Livestock Market Update - Outside Markets to Influence Trade

GENERAL COMMENTS:

Cattle did not see much volatility Monday with most contracts confined to price swings of around $1.00. The market was searching for direction and could only find it from weaker corn prices. Boxed beef was higher, but traders did not put much emphasis on that as the strength might be short-lived once retail demand is satisfied after the weekend. Choice cuts increased $1.36 with select up $0.65. Cash is expected to be no better than steady this week as packers have a portion of their cattle already contracted. This leaves them less aggressive, as they have been the past few weeks, generally resulting in weakness. The Commitment of Traders report showed funds as net buyers of 17,840 contracts of live cattle, moving their net-long positions to 37,505.

As expected, cash hogs were weaker Monday with a decline on the National Direct Afternoon report of $0.94. The pattern has been for stronger cash on Tuesday and that is again expected this week. However, slaughter was substantially lower, which may indicate packers may not be interested in paying up to obtain the hogs they need. Reducing slaughter limits the amount of hogs needed and may also improve cutouts and packer profit potential. Cutouts were higher, posting a gain of $0.36. The Commitment of Traders report showed funds as net buyers of 5,730 contracts, increasing their long positions to 51,075 contracts.

	BULL SIDE		BEAR SIDE
1)	Further weakness of corn price overnight may provide further strength in feeder cattle with some spillover to live cattle.	1)	Cash cattle are expected to trade steady to lower this week due to packers already having cattle contracted.
2)	The liquidation of cattle due to the drought in areas will tighten supplies down the road. Futures are indicating cattle prices to be $20 higher by next spring.	2)	There is a significant amount of cattle coming to the market that needs to be absorbed. Demand will need to hold, or prices could falter as beef would back up into the market.
3)	Packers have shown the pattern of buying hogs more aggressively on Tuesdays and that is expected again today.	3)	Hog slaughter is running behind a year ago and Monday's slow slaughter pace may indicate packers may be holding back in an attempt to reduce cash prices.
4)	Fund traders are increasing their long positions in the expectation of higher prices. October carries a large discount to cash with expectations price will need to move higher if demand remains strong.	4)	Hog futures are overbought and ready for a price correction. Traders may pull back if cash fails to improve.

Monday Closing Livestock Market Update - Cattle Rally as Corn Traded Lower

GENERAL COMMENTS:

The cattle contracts were able to rally into Monday's close as the market grew stronger amid a weak corn complex. Meanwhile, the nearby lean hog contracts drifted lower as the market saw a substantially smaller slaughter for the day. Hog prices closed lower on the Daily Direct Afternoon Hog Report, down $0.94 with a weighted average of $116.14 on 3,791 head. December corn is down 10 1/4 cents per bushel and December soybean meal is down $19.20. The Dow Jones Industrial Average is down 46.73 points.

LIVE CATTLE:

The live cattle market rallied on strong tones that the market left off on last Friday, and it felt comfortable keeping the complex mildly elevated Monday as boxed beef prices held strong and the day's slaughter ran aggressively. As the market wades through ample supplies of market-ready cattle, monitoring both boxed beef prices and slaughter speeds will remain incredibly important. If either of those key factors shows weakness, then the market's downside could be costly. If those key factors hold strong until market-ready supplies are worked through, and time passes to the later part of fall, then the market successfully avoided another hurdle. August live cattle closed $0.32 higher at $136.77, October live cattle closed $0.40 higher at $142.62 and December live cattle closed $0.35 higher at $148.50. The cash cattle market didn't see any action in Monday's market and it's likely that substantial trade doesn't develop until Wednesday or later as packers sit primarily flush with the numbers they need. New showlists appear to be mixed, somewhat higher in Nebraska/Colorado, but lower in Texas and Kansas. 

Monday's slaughter is estimated at 124,000 head, steady with a week ago and 7,000 head more than a year ago.

Last week's negotiated cash cattle trade totaled 74,804 head. Of that, 67% (50,088 head) were committed for the nearby delivery, while the remaining 33% (24,716 head) were committed for the deferred delivery.

Boxed beef prices closed higher: choice up $1.36 ($270.60) and select up $0.65 ($242.90) with a movement of 99 loads (49.33 loads of choice, 29.81 loads of select, 6.75 loads of trim and 13.46 loads of ground beef).

TUESDAY'S CASH CATTLE CALL: Lower. Given that packers have cattle committed for this time and supplies still favor their position, it's likely that cattle trade for steady to $1.00 or $2.00 lower again this week.

FEEDER CATTLE:

Finally, the feeder cattle market caught a break from the ongoing rally that was pumping corn prices higher. The market gapped higher to start the week off as traders were anxious to take advantage of the market's opportunity. August feeder cattle closed $1.07 higher at $179.65, September feeders closed $1.55 higher at $183.10 and October feeders closed $1.75 higher at $185.47. Much of this week's fate will again lie in the hands of the grain complex. If grain prices remain weak, then the market stands a fight chance at rallying, but if corn prices rebound, the feeder cattle market stands little chance. At Oklahoma National Stockyards in Oklahoma City, Oklahoma, compared to last week and at the sale's midsession point, feeder steers were trading $3.00 to $5.00 higher, while feeder heifers were trading consistently $3.00 higher. Steer calves were trading $5.00 to $7.00 stronger, and heifer calves were selling $3.00 to $4.00 lower. The CME Feeder Cattle Index for July 29: up $2.43, $174.74.

LEAN HOGS:

The nearby lean hog futures closed lower while the deferred contracts were able to close slightly higher. The day's biggest distress stems from the measly 408,000 head that were processed. As packers continue to get jockeyed around in the cash market, they're looking to slow production speeds as a way to combat the higher cash market and as a way to ensure that they don't flood the product side of the market. August lean hogs closed $0.20 lower at $120.45, October lean hogs closed $0.40 lower at $96.82 and December lean hogs closed $0.12 lower at $87.72. Pork cutouts totaled 306.76 loads with 269.03 loads of pork cuts and 37.72 loads of trim. Pork cutout values: up $0.36, $127.70. Monday's slaughter is estimated at 408,000 head, 42,000 head less than a week ago and 6,000 head less than a year ago. The CME Lean Hog Index for July 28: up $0.84, $121.42.

­­­­­TUESDAY'S CASH HOG CALL: Steady to somewhat higher. Monday's weak slaughter speeds is the wrinkle that could throw cash prices off. Prices will mostly likely trade higher this week, but when and how many will trade remain the question.

Monday Midday Livestock Market Summary - Cattle Celebrate the Corn Market's Weakness

GENERAL COMMENTS:

While the cattle complex celebrates the onset of lower corn prices, the lean hog complex is trending lower into Monday's afternoon as traders pay its market little attention. December corn is down 18 cents per bushel and December soybean meal is down $18.90. The Dow Jones Industrial Average is up 48.34 points.

LIVE CATTLE:

After regressing through most of last week's trade, the live cattle complex is taking Friday's slightly higher close and using it to strengthen Monday's market. August live cattle are up $0.10 at $136.55, October live cattle are up $0.05 at $142.27 and December live cattle are up $0.17 at $148.32. Thankfully, the market is seeing positive attributes rise into Monday's market as not only are traders showing the complex mild support, but boxed beef prices are again trading higher. As the market works its way through the burdening supplies of fat cattle amid the hot summer months, keeping an eye on boxed beef prices and slaughter speeds is a dire matter. If boxed beef prices begin to regress, then the market could be in for a world of hurt, but if prices hold steady until supplies of market-ready cattle become thinner this fall, then the market can again breathe as it tiptoes past a sleeping bear.

Last week's negotiated cash cattle trade totaled 74,804 head. Of that 67% (50,088 head) were committed for the nearby delivery, while the remaining 33% (24,716 head) were committed for the deferred delivery.

Boxed beef prices are higher: choice up $1.26 ($270.50) and select up $1.44 ($243.69) with a movement of 39 loads (26.59 loads of choice, 5.65 loads of select, zero loads of trim and 7.01 loads of ground beef).

FEEDER CATTLE:

After getting beat up much of last week thanks to the corn market's rally, feeders aren't sorry to see corn trading lower Monday morning as the grain market comes to terms with the fact that the first vessel of Ukraine grain has left the port of Odesa. Feeders didn't waste any time pushing the market higher as the complex opened and gapped higher to propel the market higher. August feeder cattle are up $1.05 at $179.62, September feeders are up $1.42 at $182.97 and October feeders are up $1.57 at $185.30. The monthly temperature outlook has August bearing temperatures that are mostly above normal. This could pressure cow-calf producers to sell their calves earlier than normal as ranchers are still trying to heal from drought.

LEAN HOGS:

The lean hog complex hasn't seen as much support, but there's still time for that to change. The morning's pork cutout values are higher which spreads some hopefulness that the market will see continued support from consumers again this week. August lean hogs are down $0.55 at $120.10, October lean hogs are down $0.80 at $96.45 and December lean hogs are down $0.17 at $87.65. The market doesn't expect to see cash interest as early as Monday, but if pork cutout values and cash interest could grow stronger in Tuesday's market then the futures complex may be more apt to trading higher.

The projected lean hog index for July 29 is up $0.45 at $121.87 and the actual index for July 28 is up $0.84 at $121.42. Hog prices average $114.93 on the Daily Direct Morning Hog Report, ranging from $113.50 to $128.00 on 3,196 head and a five-day rolling average of $124.44. Pork cutouts total 175.18 loads with 141.10 loads of pork cuts and 34.08 loads of trim. Pork cutout values: up $1.74, $129.08.

Monday Morning Livestock Market Update - Limited Hope For Higher Cash

GENERAL COMMENTS:

Live cattle have struggled to retain initial strength seen from the Cattle on Feed report with futures weakening most of last week, giving back a good portion of its gains. Traders had a tough time supporting the market when cash could not find any traction. The initial expectations this week are for further pressure on cash. Packers seem to be in a good position where they do not need to bid for supply aggressively. Increased slaughter rates are being met with sufficient cattle. Higher boxed beef prices provided some support, but they may struggle this week as well. On Friday, choice increased $1.47 with select up $1.44.

August hogs posted a banner week with price closing at the highest level since March 30. The contract has two weeks to trade and numerous chart gaps remaining below the market. It is doubtful all of the gaps, if any, will be closed before the end of the contract. Futures closed higher on momentum and not due to underlying cash or cutouts. The National Direct Afternoon Hog report showed a decrease of $2.51 with cutouts down $1.45. It may be a slow beginning to the week as the trade assesses weekend pork movement.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have been able to hold well in the face of weaker cash over the past few weeks. Traders anticipate tighter supplies during the second half of the year.	1)	Packers have not been aggressive over the past few weeks as they had some cattle forward contracted. This has not changed much, leaving them less aggressive in the cash market.
2)	Boxed beef prices held well last week, indicating product is moving well despite higher food prices.	2)	Traders may take a wait-and-see attitude Monday due to the uncertainty of cash for the week.
3)	Pork cutouts have been strong with gains from week-to-week indicating good demand.	3)	The large discount of the October hog contract indicates traders feel cash strength will not be maintained.
4)	Hog weights continue to decline, dropping 0.8 pounds from the previous week to an average weight of 276.7 pounds. This is down 1.4 pounds from a year ago.	4)	Packers are not expected to be aggressive Monday as they wait for indication of pork movement over the weekend.