Cattle: Higher Futures: Higher Live Equivalent: $194.47 – $0.12*
Hogs: Lower Futures: Mixed Lean Equivalent: $127.99 + $1.44**
*Based on a formula estimating the equivalent of live cattle to packer gross proceeds. (The Live Cattle Equiv. Index has been updated to reflect recent changes in live cattle weights and grading percentages.)
** Based on a formula estimating Lean Hog Equivalent of Gross Packer Sales.
Live cattle had cash market gains of $2.00-$4.00 already factored in with traders appearing to be eyeing today’s Cattle on Feed report. Trading actions can be two-sided as no one wants to be overly long or short. Packers had to pay to obtain the livestock required to keep up the heavy pace of slaughter. It’ll be interesting to see what they do in the coming weeks, as their margins are well down year over year and below the three-year average. It’s unclear if they were able to differentiate the delivery of many cattle this week. Boxed beef was mixed with a $0.05 selection and a $0.42 selection. Weekly export sales totaled 18,900 tons, up 29% from the previous week, with China being the biggest buyer. The Cattle of Feed report will be released this afternoon. The average estimate for feed supply is 100.7%, placements 98.5% and marketing 97.1% a year ago.
Hog futures fell off a cliff yesterday, continuing the heavy liquidation after a day of brief respite. Fundamentals do not suggest that the market has turned bearish. Cash on the National Direct Afternoon Hog report closed lower as expected, although the drop from $7.25 was significant. Cutouts closed $1.44 higher but failed to offset bearish cash and technical selling pressure on futures. Weekly exports were unsupportive at 13,600 tonnes, down 37% from the previous week. China was not listed as a buyer. Follow-up selling is likely as futures closing at or near the lows suggest further liquidation. The Saturday slaughter is estimated at 57,000 head.
|bull side||BEAR SIDE|
Packers appear to be underpaid and must aggressively bid for cattle to maintain a high slaughter pace.
Cattle futures failed to post gains despite cash trading higher. Traders are reluctant to take the market higher.
|2)||The Cattle on Feed report may contain some positive numbers that could indicate a tighter supply in the future.||2)||
The Cattle on Feed report was a wild card and one where traders need to position themselves to limit the report’s risk and allow futures to drift.
The strong liquidation of hog futures could start today as it is the third day and it is the last day of the week.
Hog futures could move lower to close the chart gap that has been open since early July.
Pig slaughtering has increased, indicating strong demand. Pig weights were up slightly from the previous week, but down almost 2 pounds from a year ago.
Soft export sales are not what the market wants to see. Pork needs to keep moving so the supply doesn’t back up.
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Robin Schmahl can be reached at [email protected]
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