Tuesday Morning Livestock Market Update - Further Strength Expected in Futures

GENERAL COMMENTS:

Feeder cattle futures pushed easily to new contract highs in September and later contracts. August will cease trading on Thursday as the contract goes off the board. There will likely be follow-through buying as new contract highs might bring in further technical buying interest. With continued strong interest in the country for feeder cattle and higher prices at auctions, traders were confident higher prices were necessary Monday. Live cattle were moderately higher, pulled along by the strength of feeders but remaining cautious over the strength of cash this week. Boxed beef prices slipped Monday with choice down $0.86 and select down $0.58. Packers will purchase cattle this week, but not aggressively due to the Labor Day holiday next week. FSA announced it is updating the Livestock Indemnity Program (LIP)payment rate to producers that have lost cattle during the extreme heat this summer. The payment rate for beef calves over 800 pounds will increase from $1,244 per head to $1,618 per head.

Hog futures overcame the bearishness of cash and cutouts on Friday to move to triple-digit gains Monday. Contracts bounced from technical support, nearly eliminating the losses of last week. October outpaced the rest of the complex as traders saw packers paying higher prices to begin the week. The National Direct Afternoon Hog report showed cash increasing $2.30. Packers want to purchase early this week and should be aggressive Tuesday as well. Cutouts took back some of Friday's large loss, posting a gain of $2.63.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle made new contract highs, increasing the interest of technical traders. This should result in further follow-through buying.	1)	Cash cattle showed weakness the past few weeks with the anticipation cash will be no better than steady this week. Feedlots may move cattle they have been holding the past few weeks.
2)	Deferred live cattle contracts are seeing more strength as cattle numbers are expected to remain tight through much of next year.	2)	Live cattle remain in a range it may be difficult to move above unless packers increase slaughter pace, which is unlikely anytime soon.
3)	Packers needed hogs and are willing to purchase early in the week, which should provide higher prices again Tuesday.	3)	The rebound of hog futures seemed to be technical in nature rather than fundamental as contracts bounced from support. Further strength may be difficult to achieve due to price uncertainty.
4)	Higher cutout values are expected again Tuesday as the large decline on Friday likely should have never happened. Slaughter remains strong as packers need to satisfy demand.	4)	Packers have sufficient hogs to fill slaughter needs and meet demand. This may limit their aggressiveness in the cash market.

Monday Closing Livestock Market Update - Feeder Cattle Jump $2.00 to $3.00 Higher

GENERAL COMMENTS:

It was a strong Monday for the livestock complex as all three of the markets were able to close higher, but it was the feeder cattle complex that saw the biggest gains. Hog prices closed higher on the Daily Direct Afternoon Hog Report, up $2.30 with a weighted average price of $86.92 on 1,771 head. December corn is up 8 1/4 cents per bushel and December soybean meal is up $3.80. The Dow Jones Industrial Average is up 213.08 points.

LIVE CATTLE:

The live cattle complex may not have been as aggressive as the feeder cattle complex was, but it still managed to close higher, which sure beats the alternative. October live cattle closed $0.37 higher at $181.55, December live cattle closed $0.52 higher at $185.65 and February live cattle closed $0.75 higher at $189.95. Beef prices were marked lower throughout the day, but given that it's only Monday, that doesn't mean too much at this point. Traders will, however, keep an eye on boxed prices moving forward as that could affect packers' aggressiveness not only in the cash market but also in terms of processing speeds. Monday's slaughter is estimated at 125,000 head, 3,000 head more than a week ago and 2,000 head more than a year ago. New showlists appear to be mixed, higher in Nebraska/Colorado, but lower in Kansas and Texas.

Last week, Northern cattle began to trade on Thursday, but the majority of the week's trade happened on Friday at $290 to $295, mostly at $292, which is roughly $3.00 lower than the previous week's weighted average. Southern live cattle didn't trade until Friday afternoon and their sales were marked at $178 to mostly $179, which is considered fully steady with the week before. Last week's negotiated cash cattle traded totaled 68,899 head. Of that, 83% (57,184 head) were committed for the nearby delivery, while the remaining 17% (11,715 head) were committed for the deferred delivery.

Boxed beef prices closed lower: choice down $0.86 ($317.04) and select down $0.58 ($292.09) with a movement of 92 loads (45.31 loads of choice, 27.98 loads of select, 5.19 loads of trim and 13.81 loads of ground beef).

TUESDAY'S CATTLE CALL: Steady. Packers weren't able to get a plethora of cattle bought last week, which likely means that they'll need to buy modestly this week, and that should keep prices at least steady.

FEEDER CATTLE:

While looking at the nearby corn contracts that closed $0.07 to $0.08 higher, the feeder cattle market charged through Monday's close and scored new life of the contract highs in most of the nearby contracts. The knowingness that cattle supplies are going to remain thin well through the end of the year seems to be resonating more and more with traders, as they continue to come to terms with the strong fundamental outlook of the market. September feeders closed $3.07 higher at $254.27, October feeders closed $3.05 higher at $257.02 and November feeders closed $2.65 higher at $258.05. At Oklahoma National Stockyards in Oklahoma City, Oklahoma, compared to last week and at their midsession point, feeder steers were trading $1.00 higher but steers weighing 600 to 700 pounds were trading $4.00 higher and feeder heifers sold mostly $1.00 to $3.00 stronger. Steer and heifer calves were only lightly tested but instances of $10.00 higher was seen on some offerings. Feeder cattle supply over 600 pounds was 56%. The CME Feeder Cattle Index for Aug. 25: $2.24, $247.83.

LEAN HOGS:

The lean hog complex was able to close higher along with the cattle complex as traders have plenty of room to trade higher technically before running into resistance and as a higher close in both cash prices and pork cutout values was a welcomed surprise for the market. October lean hogs closed $2.02 higher at $81.85, December lean hogs closed $1.40 higher at $73.42 and February lean hogs closed $1.07 higher at $77.45. Pork cutout values were extremely volatile last week, and Monday afternoon's higher close was much needed, but traders will continue to monitor pork demand closely. Pork cutouts totaled 264.25 loads with 233.06 loads of pork cuts and 41.19 loads of trim. Pork cutout values: up $2.63, $96.05. Monday's slaughter is estimated at 476,000 head, 5,000 head more than a week ago and 6,000 head less than a year ago. Friday's hog slaughter was revised to 463,000 head, pushing the week's total slaughter to 2,495,000 head. The CME Lean Hog Index for Aug. 24: down $1.22, $95.18.

TUESDAY'S HOG CALL: Steady to somewhat higher. Given that packers were wiling to jump into the market and buy hogs on Monday to the point where prices printed higher, it's likely that they need some more hogs and that prices could be higher on Tuesday as well.

Monday Midday Livestock Market Summary - Traders Send Contracts Higher

GENERAL COMMENTS:

The livestock complex is being supported Monday morning as all three of the markets are trading higher. No cash cattle business has developed yet and it's likely that any will ahead of Wednesday or even potentially Thursday. December corn is up 7 1/4 cents per bushel and December soybean meal is up $1.30. The Dow Jones Industrial Average is up 141.07 points.

LIVE CATTLE:

The live cattle complex is continuing to trade higher and is now on the verge of trading above $182, which has been a short-term resistance plane for the spot October contract. In the last week, traders have really seemed to find comfort in the strong fundamental position of the live cattle/cash cattle market. Traders know that fed cattle supplies are going be thin moving into the last two quarters of the year and, so long as beef demand doesn't plummet, strong cash cattle prices should be the theme of the marketplace. October live cattle are up $0.55 at $181.72, December live cattle are up $0.32 at $185.45 and February live cattle are up $0.45 at $189.65.

Last week, Northern cattle began to trade on Thursday, but the majority of the week's trade happened on Friday at $290 to $295, mostly at $292, which is roughly $3.00 lower than the previous week's weighted average. Southern live cattle didn't trade until Friday afternoon and their sales were marked at $178 to mostly $179, which is considered fully steady with the week before.

Boxed beef prices are lower: choice down $1.18 ($316.72) and select down $0.23 ($292.44) with a movement of 55 loads (21.61 loads of choice, 17.08 loads of select, 5.19 loads of trim and 10.62 loads of ground beef).

FEEDER CATTLE:

Up, up and away go the feeder cattle contracts into Monday's noon hour, as the nearby contracts are seeing easy $2.00 gains while the deferred contracts are trading at least $1.00 higher. Monday's move is rather impressive given the fact that the live cattle complex is only trading mildly higher and that the nearby corn contracts are trading $0.06 higher. Nevertheless, traders are electing to run the contracts higher into Monday's noon hour, and I can't help but believe that the scarcity of calves to be offered later this fall, amid excellent cash cattle prices, is fueling their drive. September feeders are up $2.22 at $253.57, October feeders are up $2.27 at $256.25 and November feeders are up $1.95 at $257.35.

LEAN HOGS:

The lean hog complex is higher as traders have an opportunity to support the market and not be in immediate danger of coming up against resistance pressure. October lean hogs are up $1.55 at $81.37, December lean hogs are up $1.10 at $73.12 and February lean hogs are up $0.80 at $77.17. Yes, pork cutout values are higher Monday morning, but after last Friday, with the belly dropping nearly $60.00, it would be even more concerning if prices were lower.

The projected lean hog index for Aug. 25 is down $1.29 at $93.89, and the actual index for Aug. 24 is down $1.22 at $95.18. Hog prices are unavailable at this time on the Daily Direct Morning Hog Report due to packer submission issues. Pork cutouts total 137.31 loads with 113.40 loads of pork cuts and 23.91 loads of trim. Pork cutout values: up $4.06, $97.48.

Monday Morning Livestock Market Update - Futures Eye Holiday Next Week

GENERAL COMMENTS:

Cash cattle ended the week steady to lower, but better than some had anticipated. Northern cattle traded $1.00 lower Friday, which was a bit better than earlier trade during the week. Southern cattle were about steady with the previous week. The fact that cash is not improving despite boxed beef showing strength indicates packers are playing their cards right and slower slaughter is improving margins. A seasonal decline of boxed beef after Labor Day may provide some headwind to the market. Packers may exercise patience again this week as they are purchasing ahead for the holiday-shortened week next week. Boxed beef was higher Friday with choice up $0.27 and select up $0.76. The Commitment of Traders report showed funds reduced their long futures positions by 7,377 contracts, bringing their net-long positions to 90,394 contracts. Feeder cattle showed funds reducing their long positions by 1,283 contracts, bringing their net-long positions to 11,888 contracts.

Hog futures struggled through Friday, closing mixed but well off their highs. October was under pressure as cash continued to fall. The National Direct Afternoon report showed cash down $3.03 to close out a negative week. Traders had hopes that a repeat of last week would again unfold with short-covering into the weekend. However, the incredible weakness of cutouts turned up the pressure on futures with contracts closing around $2.00 off their highs. Cutouts lost an incredible $11.50 with a huge $58.48 decline in bellies. I cannot remember ever seeing pressure of this magnitude or at least it has been a long time. Fundamental support remains elusive. The Commitment of Traders report showed hogs reducing their long positions by 1,646 contracts, bringing their net-long positions to 22,502 futures contracts.

	BULL SIDE		BEAR SIDE
1)	Boxed beef continues to improve, which is also improving packer margins, allowing them to be more willing to pay for cattle and reducing the recent weakness of cash.	1)	A slower slaughter pace is improving packer margins, which will keep them working the market lower to maintain that direction. The holiday next week may leave them less aggressive.
2)	Feeder cattle futures are holding in a sideways trading pattern and are poised to move higher as numbers remain tight.	2)	Boxed beef prices seasonally decline after Labor Day, which will be a factor for both demand and the willingness of packers to purchase.
3)	Cutouts and cash have been weakening, yet hog futures have been holding remarkable well.	3)	The large decline of cutouts and lower cash Friday are expected to pressure the market Monday.
4)	Lower pork prices should improve demand, which should cause packers to be more aggressive in their purchasing. After the weakness of last week, packers could be more aggressive with their purchases earlier this week.	4)	Packers may not need to be aggressive this week as next week will be a holiday-shortened week.