Cattle: Steady Futures: Mixed Live Equiv: $223.08 -$2.14*
Hogs: Lower Futures: Mixed Lean Equiv: $119.69 +$5.17**
* based on formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)
** based on formula estimating lean hog equivalent of gross packer revenueGENERAL COMMENTS:
Cattle futures were able to close higher in all contracts with the exception of August. There was little to get excited about due to limited cash trading. It certainly does not seem as if cash will be higher than the first indications of the week. Much more business should be done Friday as packers need to purchase cattle. Whether they will need to bid up to get them is the question that will be answered today. Boxed beef finally slowed its descent, ending mixed Thursday with choice cuts down $4.63 and select cuts up $0.73. Export sales were respectable with an increase of 31% over the previous week. China was the third largest buyer. Futures trading might be somewhat uneventful Friday as traders will look ahead to the Cattle on Feed report to be released this afternoon at 2 p.m. CDT. The average estimate for cattle on feed is for an increase of 0.7% from a year ago. Placements are expected to show a decline of 4.6% from a year ago. Marketings are estimated to show an increase of 23.6% from May 2020. The numbers will be skewed due to the disruptions last year, but the trade will react to how the actual numbers will fall in relation to the estimates.
Hogs tried to find support Wednesday but could not hold Thursday with July closing limit down, which may have been the only reason that price did not fall below $100. The market was not helped by the sharp drop of cash Thursday with the National Direct Afternoon price down $6.60. Cutouts had a nice turn around Thursday with an increase of $5.17. If cutouts find a bottom, maybe cash will as well. Export sales were somewhat uneventful with a decrease of 2% from the previous week and down 4% from the four-week average. China was the fourth largest buyer. The Hogs and Pigs report showed all hogs and pigs at 75.653 million head, down 2.2% from a year ago. This decline was slightly less than the trade estimate. Kept for breeding totaled 6.230 million head, a decrease of 1.5% and mostly in line with what the estimate was. Kept for marketing totaled 69.423 million head, down 2.3% and slightly lower than the estimate. It would appear this report may be somewhat neutral, but it is difficult to make a proper comparison to last year. Saturday hog slaughter is projected at 25,000 head.
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There was limited cash business done Thursday, leaving it up to the end of the week. There is a possibility packers may need to bid up to obtain the necessary number for the week.
With the Cattle on Feed report after the close Friday, traders may remain cautious with some liquidation possible.
If actual numbers and the Cattle on Feed report comes in under what the trade expects for herd size and placements and higher than they expect for marketings, futures could move higher.
If packers do not bid higher than they already have, live cattle futures may remain stagnant.
July hogs hold a huge discount to cash and will need to converge over the next 3 weeks.
July hogs closing limit down would suggest some follow-through at the start of trading.
Futures are severely oversold and ready for a bounce. Now that the Hogs and Pigs report is history, this could unfold.
Weakening cash does not give traders confidence to step back into the hog market aggressively to establish long positions.
For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.
Robin Schmahl can be reached at email@example.com
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