The firm undertone in live cattle trade is developing through the week, and could help to solidify additional gains Friday. Lean hog futures continue to remain weak, fueled by renewed concerns of additional fundamental pressure.
Cattle: Steady to Higher Futures: Higher Live Equiv $154.12 -0.87*
Hogs: Lower Futures: Lower Lean Equiv $ 84.80 -1.30**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
The lion’s share of cash cattle trade has been delayed until Friday since limited packer interest showed up just in the last couple of days. So far, most feeders are unwilling to accept current bids that are steady-to-firm with last week’s price levels. Given the recent surge in beef values and this week’s slow but steady growth in futures trade, it is expected that prices will show improvement unless overall futures markets would happen to fall apart through the day.
Futures trade is expected to remain generally firm as follow-through support is moving back into the complex. Traders will get their first chance to trade Thursday’s Cold Storage report, which reported 455 million pounds of beef in warehouses. This is a 12% jump from June levels but is 6% under year-ago levels.
The indication that year-over-year clearance remains good, with the larger amount of cattle inventory through the year remaining positive, but traders are likely to be uneasy at the size of month-over-month growth, and what this may indicate for short-term beef demand. It is expected that traders will not spend much time on the Cold Storage report with the Cattle on Feed report released after trade closes Friday. This will likely cause some additional market adjustments ahead of the report.