Futures May Drift Into Weekend


Cattle: Steady Futures: Mixed Live Equiv: $229.91 -$0.71*

Hogs: Steady Futures: Higher Lean Equiv: $99.33 +$0.10**

*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.

Cash cattle traded Thursday with prices steady to as much as $3.00 lower. Cattle in the North traded as much as $3.00 lower while Southern cattle traded steady to $1.00 lower. Most of the trade in the South was steady with last week at $179. Traders covered some short positions now that cash is known and there is optimism packers may need to purchase more cattle Friday but likely at steady money to finish up sales for the week. However, it is the final trading day ahead of a three-day weekend, which generally had traders squaring up their positions to limit exposure. This sometimes causes trading activity that is not related to fundamentals. Boxed beef prices Thursday were lower with choice down $1.32 and select down $0.28. Weekly export sales were good at 18,200 metric tons (mt), up 59% from the previous week, which likely provided some support to the market yesterday.

Nearby hog futures could not hold the gains from Thursday as the market remains choppy. The National Direct Afternoon Hog report showed cash down $0.42, putting pressure on the market. Cutouts showed a minor loss with a decline of $0.10. This did not provide the support the market needed to maintain the technical gains Wednesday. With a mixed close Thursday, it is uncertain whether there will be any short-covering ahead of the three-day weekend or if futures may drift Friday. Weekly export sales were supportive, totaling 36,900 mt, up 12% from the previous week. Saturday hog slaughter is estimated at 21,000 head as one packer needs to make up for downtime during the week.

BULL SIDE BEAR SIDE
1)

Southern cattle were able to trade mostly steady, which is considered a victory due to the shorter slaughter week ahed.

1)

Hot weather again is going to impact cattle performance, which will increase the cost of production as those cattle may need to be held longer.

2)

Good export sales indicate international buyers are not shying away at current prices. Current prices may keep exports strong and competition active for international and domestic demand.

2)

Cattle futures may settle back as traders might even-up positions ahead of the extended weekend.

3)

Hog weights showed a large decrease of 4 pounds from the previous week, averaging 274.3 pounds and 2.6 pounds below a year ago.

3)

Hogs may not see much fundamental support to push futures higher into the weekend. Packers are not likely to be aggressive.

4)

There may be some short-covering ahead of the weekend as packers may need to be more aggressive after the Labor Day weekend as store shelves will need to be restocked.

4)

Pork cutouts have been erratic but mostly weaker, which does not provide traders with the confidence the market has found support.

**

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 rschmahl@agdairy.com

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