Cattle: Steady Futures: Higher Live Equiv: $192.97 -$2.02*
Hogs: Higher Futures: Higher Lean Equiv: $110.17 -$0.41**
*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 revenue.GENERAL COMMENTS:
There is optimism for steady to higher cash this week with business expected to surface Wednesday. It is uncertain just how aggressive packers will be as we head into the holiday weekend. Slaughter pace has been strong, which has kept cattle moving and feedlots current. The question of whether demand will remain strong after Labor Day is one that is being mulled over. The statement last Friday from the Fed chairman indicates they will be taking strong steps to curb inflation, which may cause more pain for consumers. Boxed beef took a hit Tuesday with choice down $3.25 and select down $3.07. Expected demand for the holiday may be filled with retail outlets waiting for actual demand through the weekend. Wednesday is the final day to trade the August live cattle contract.
Hogs were again supported technically as short-covering continued. Cash did not follow the usual pattern of strong prices on Tuesday with price falling $2.52 on the National Direct Afternoon Hog report. Cutouts did not find support either, declining $0.41 with continued weakness of bellies. Packers may not need to step up aggressively this week as it seems they have sufficient supply to keep chain speeds steady. Aggressive buying may wait until after the holiday when demand is assessed.
|BULL SIDE||BEAR SIDE|
Corn futures were again lower overnight, which should provide support to the cattle complex.
The recent support for cattle seems to be driven by weaker corn futures. If corn finds support, cattle may resume their recent downtrend.
Cash cattle are expected to trade Wednesday with live cattle traders expecting nothing less than steady prices.
Demand may slow after Labor Day, which may result in boxed beef prices trending lower.
Hogs should continue to rebound from the oversold condition with short-covering generally lasting three days. The market might have been overdone to the downside.
The recent rally in hogs has been technical in nature and not the result of fundamental support.
Slaughter pace has increased and is closely in line with a year ago. This will keep hogs moving and current.
Packers may not need to be aggressive this week, leaving the market floundering as the short-covering rally may be near its completion.
For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.
Robin Schmahl can be reached at firstname.lastname@example.org
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