Friday Morning Livestock Market Update - Limited Volatility Expected

GENERAL COMMENTS:

It was supportive to see cash cattle trade higher Thursday. Slaughter pace has been strong, and packers needed to turn a bit more aggressive to ensure sufficient supply. Lighter weights require more animals to obtain the required tonnage. It is possible packers were willing to bid higher to maintain a certain amount of forward contracted cattle in order to minimize having to be very aggressive over the next few weeks. Cash traded $1.00 higher in the South with Northern cattle $2.00 to $3.00 higher. Boxed beef prices were weaker again with choice down $1.66 and select down $0.95. Weekly export sales were nothing to write home about with sales totaling 12,000 metric tons (mt), down 52% from the previous week. China was not listed as one of the top five buyers. They had been a consistent buyer for quite some time.

August hog futures remained close to the index which was reported at $120.94. The contract only has one week remaining and will rise and fall with the reality and not the perception of what might happen. Later contracts showed strength as trading reflected strong cash Wednesday and good weekly export sales. Export sales totaled 31,000 mt, up 43% from the previous week with China listed as the top buyer. Cash was weaker Thursday as expected with a decline of $3.45. Cutouts were also lower with a decline of $0.69. Slaughter pace was strong and seems to be picking up which may keep packers aggressive overall. Saturday slaughter is estimated to be 64,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle trading higher was a bit of a surprise as earlier trade had been mostly steady. One had to wonder if the heavier supply of cattle has now worked through the system.	1)	Traders did not get too excited over higher cash cattle Thursday. There may still be a significant volume of animals that need to come to the market over the next few weeks.
2)	The trend is higher, providing cattle traders confidence to add to their long positions.	2)	Beef packer margins have been lower than last year and the three-year average. This leaves them strategically trying to limit the amount paid for cattle as long as possible.
3)	Much of the attention in hogs has turned to October and later months. The substantial discount of October to August should result in strength after the August contract goes off the board next Friday.	3)	Hog futures have chart gaps remaining significantly below the market in all contracts. There is a lot of time for October and later months to fill those gaps.
4)	Cash and cutouts continue to advance overall, possibly indicating hog supply is tightening.	4)	Cash is expected to be lower again Friday, which may leave hog futures mixed and trading in a narrow range after the huge reversal Thursday.

Thursday Midday Livestock Market Summary - Southern Cattle Trade Higher

GENERAL COMMENTS:

The cattle contracts are trading gingerly into Thursday's market while the lean hog contracts take on Thursday's arrival with a bit more aggression. There's been some cash cattle trade reported in the South at $0.50 to $1.00 higher than the rest of the trade this week, which begs the question: are packers short bought and could the cash market have found a bottom in last week's market? December corn is up 9 1/4 cents per bushel and December soybean meal is up $21.70. The Dow Jones Industrial Average is down 73.20 points.

LIVE CATTLE:

There's nothing more thrilling to feedlots than when packers have to up their bids later in the week because they've been caught short bought. There's been a light round of trade reported in the South at $135.50 to $136 which is $0.50 to $1.00 higher than the rest of the week's business and last week's trade. As packers show the cash cattle market more interest, the conclusion that's seeming somewhat undeniable is that packers are short bought and actually need cattle. The big question now is: was last week's trade the low for the summer?

The nearby contracts aren't doing much while the deferred contracts add slightly to their contracts. With China firing some missiles, the entire commodity market is hesitant to do much of anything as we all wait to see if tensions will ease or grow more concerning. August live cattle are down $0.10 at $137.80, October live cattle are down $0.32 at $143.62 and December live cattle are down $0.15 at $149.80.

Beef net sales of 12,000 mt for 2022 were down 52% from the previous week and 30% from the prior four-week average. The three primary buyers were South Korea (2,900 mt), Japan (2,400 mt) and Canada (1,800 mt).

Boxed beef prices are higher: choice up $0.27 ($268.21) and select up $0.13 ($241.43) with a movement of 52 loads (23.41 loads of choice, 14.51 loads of select, 4.70 loads of trim and 9.77 loads of ground beef).

FEEDER CATTLE:

The feeder cattle contracts would have gladly traded higher into Thursday's market if only the corn complex would have stayed weak and the nearby live cattle contracts could have shown support. The main reason why feeders are trading lower though is the $0.07 to $0.08 jump in corn. Even though the live cattle contracts aren't trading higher, it's exciting to see that a light trade has developed in parts of South at $135.50 to $136 which is $0.50 to $1.00 higher than both this week's trade and last week's business. Feeder cattle buyers have looked at their breakevens on the calves and feeders they've been buying and aside from expensive corn, buyers were desperately needing to see higher prices on the fat cattle side of things to make these feeder cattle prices work. And, even though this week's slight bump isn't where cattlemen rest easy at, it shows signs that the cash cattle market could have made it's low. August feeders are down $0.55 at $178.80, September feeders are down $0.57 at $182.32 and October feeders are down $0.60 t 185.10.

LEAN HOGS:

The lean hog complex has grown stronger through Thursday's market but at this point, the contracts still seem unsure if they can bypass resistance. Thursday's export report was favorable to the pork market as net sales of 31,000 mt are pleasing. It comes as no surprise that midday cash prices are lower after Wednesday's huge movement, the important thing to watch for in Thursday afternoon's data will be how pork cutout values fair. October lean hogs are up $1.22 at $97.07, December lean hogs are up $1.00 at $88.40 and February lean hogs are up $0.67 at $91.15.

The projected lean hog index for Aug. 3 is up $0.67 at $121.61 and the actual index for Aug. 2 is down $0.63 at $120.94. Hog prices are lower on the Daily Direct Afternoon Hog Report, down $2.28 with a weighted average of $127.04, ranging from $114.00 to $135.00 on 11,095 head and a five-day rolling average of $126.04. Pork cutouts total 147.80 loads with 125.74 loads of pork cuts and 22.06 loads of trim. Pork cutout values: up $3.43, $128.92.

Pork net sales of 31,000 mt for 2022 were up 43% from the previous week and 35% from the prior four-week average. The three largest buyers were China (16,800 mt), Mexico (8,600 mt) and Japan (1,800 mt).

Thursday Morning Livestock Market Update - Futures Search for Support

GENERAL COMMENTS:

Traders were waiting to see some cash support and finally got it. Not from higher prices, but steady prices. Anything was better than another week of lower cash. The week is not over, but trade in both regions developed at steady prices with last week. What will be watched is whether packers will be able to purchase sufficient cattle at steady money and continue to procure sufficient cattle for current needs as well as deferred delivery. Boxed beef prices closed lower with choice down $0.52 and select down $0.25. These were minor losses but kept keeping traders from getting too excited over demand. Weekly export sales and the movement of corn futures will influence trading activity Thursday.

There is no holding back August hogs. Cash was anticipated to be higher Wednesday and higher it certainly was. The National Direct Afternoon Hog report posted a gain of $9.31. The August contract will settle to the index and with the index currently at $121.57, there is little reason to believe the market will see much downside over the next week. The offsetting influence of strong cash Wednesday was the fall in cutout values of $5.53. The weakness of cutouts stemmed from a decline of $26.21 for bellies. If you recall, belles were up $26.57 on Tuesday. It is a wonder as to how the price can swing so much over the course of two days. Cash is expected to be lower Thursday following the pattern. Saturday hog slaughter is projected at 64,000 head.

	BULL SIDE		BEAR SIDE
1)	Packers did not hold out for lower cash but needed to purchase cattle to keep chain speed running at the current pace.	1)	Although steady cash cattle can be considered a victory this week, packers will try to purchase cattle for deferred delivery to keep ahead of the curve and avoid being short bought.
2)	Traders anticipate tightening supplies as the year progresses, which should keep deferred contracts supported.	2)	Feeder cattle futures may be developing a head and shoulders top which technical traders may view as a selling opportunity.
3)	Although pork cutouts should a significant loss Wednesday, overall cutout prices continue to advance, indicating strong demand.	3)	Traders continue to keep October hogs at a substantial discount to the current market, indicating the belief that lower prices will unfold over the next two months.
4)	August hog futures are not likely to close any of the chart gaps remaining below the current market. The contract only has about a week before it ceases trading.	4)	Lower cash is expected for hogs the rest of the week. This may keep futures price gains limited.

Wednesday Closing Livestock Market Update - Cattle Run With Market

GENERAL COMMENTS:

It was a tremendous day for the cattle contracts as the market saw ample technical support, and with cash cattle trading at steady money as opposed to weaker prices, the market's tone shifted. The lean hog market wasn't able to capture the same type of gains, but it hopes that Thursday's export report unveils something favorable. Hog prices closed higher on the Daily Direct Afternoon Hog Report, up $9.31 with a weighted average of $130.64 on 34.710 head. December corn is up 2 cents per bushel and December soybean meal is down $5.00. The Dow Jones Industrial Average is up 416.33 points.

LIVE CATTLE:

Wednesday's market was just what the cattle complex needed to see, serving as a reminder that bullish things are to come in the future as the market continues to trudge through the dog days of summer. The problem with putting too much faith in the future and on what "should happen," is that there's always the possibility that the market's environment changes and that the fruit of the market never comes to ripen. As cattlemen look at higher interest rates and blistering hot days in some parts, it's easy to get one-track minded and swelter on what currently is. But, as I said, Wednesday's market was the banner of hope that cattlemen needed. After weeks of lower cash cattle trade and on lousy volumes, Wednesday's market saw cattle trade for steady, which indicates that packers are in need of cattle. It undoubtedly helped that, not only did the board trade higher, but it traded significantly higher in the 2022 and early 2023 contracts. Steady money isn't where the market wants to hang its hat, and thankfully there are still feedlot owners/managers who remember the days when live cattle were trading for $170, but an unforeseen change in the market's current trading behavior has a way of waking feedlots up and reminding them that they can bat for more.

August live cattle closed $1.32 higher at $137.90, October live cattle closed $1.82 higher at $143.95 and December live cattle closed $1.67 higher at $149.95. When looking at the two heaviest traded contracts right now, October 2022 and December 2022, it was exhilarating to see that Wednesday's close pushed the market to somewhat break out of its sideways trading range. For the October 2022 contract, the market closed at its highest point since the end of April, and the December contract closed at its highest point since early May. There was some light trade that took place in the South at $135 which is fully steady with last week's business and some Northern trade that developed for $225 which is also steady with last week's market. Seeing steady trade in the cash market during the first week of August is extremely telling that packers may not be as bought up as thought and that supplies could be getting cleaned up. 

Wednesday's slaughter is estimated at 124,000 head, 1,000 head less than a week ago and 2,000 head more than a year ago.

Boxed beef prices closed lower: choice down $0.52 ($267.94) and select down $0.25 ($241.30) with a movement of 106 loads (48.69 loads of choice, 18.25 loads of select, 22.70 loads of trim and 16.07 loads of ground beef).

THURSDAY'S CASH CATTLE CALL: Steady. Unless packers are desperately thin bought, prices will likely hold steady with the week's trend.

FEEDER CATTLE:

Early this week I was wrapping up the final touches to my column when I was left with the final question of: Who sits in the driver seat of this fall's feeder cattle market? You, the live cattle market or corn? In my concluding thoughts, I shared that the feeder cattle market had carried its own weight and performed extremely well since the beginning sales early this summer, and that corn prices have mainly regressed since May, which means that the lacking and unsupportive piece of the feeder cattle market has been the live cattle trade. Thankfully, Wednesday's market was a bit of a changing point as cash cattle traded steady (yes, I know steady isn't $10.00 higher, but a wrinkle in the descend is helpful) and the futures complex closed higher. August feeders closed $1.22 higher at $179.35, September feeders closed $1.45 higher at $182.90 and October feeders closed $1.50 higher at $185.70. Combine the technical support that the market saw with the continued buying demand that the countryside has seen, and the market sits prime to push higher if support sticks around. The CME Feeder Cattle Index for Aug. 2: down $0.36, $174.04.

LEAN HOGS:

Even though Wednesday had a big volume day in the cash hog market, the fact that pork cutout values closed over $5.00 lower really put a damper on the market's upside potential. October lean hogs closed $0.37 lower at $95.85, December lean hogs closed $0.35 lower at $87.40 and February lean hogs closed $0.47 lower at $90.47. The big drop in pork cutouts values came from the $26.21 reduction in belly cuts, as otherwise the market saw minimal losses. Pork cutouts total 254.18 loads with 223.24 loads of pork cuts and 30.95 loads of trim. Pork cutout values: down $5.53, $125.49. Wednesday's slaughter is estimated at 469,000 head, 1,000 head more than a week ago and 3,000 head less than a year ago. The CME Lean Hog Index for Aug. 1: down $0.30, $121.57.

­­­­­THURSDAY'S CASH HOG CALL: Lower. Given that the market had such a big cash trade in Wednesday's market, it's likely that Thursday sees a smaller volume traded, and for weaker money.