Written Commentary
CASH STEER PRICES TRADED LOWER LATE YESTERDAY
LIVE CATTLE
Cash steer traded late yesterday at $1.05 in TX. It appears from 6,000 to 10K head may have traded. This is down from 106-107 last week and will most likely be a disappointment to futures traders today. Futures gapped lower yesterday and I’m not expecting this gap to be filled in the short term. We’ve been hedging and strongly recommend getting some protection on the book. Our strategy has been executing hedges for fall and spring production, leaving winter production unhedged for now. Feeders may test 130 before this correction is complete. Notice how flat the spreads are in feeders. My initial reaction is to interpret this as bearish. Look for selling pressure in both fats and feeders again today.
LEAN HOGS
The cold storage report showed total frozen pork stocks at a nine-year low. This is a result of the huge drop in production that occurred in May and June. Pork drawdown during July was just over 1 million pounds. The 5-year average drawdown during July is 130 million pounds. I’m not calling this report bullish toward futures prices with huge production coming down the pipe. Cash traded lower yesterday and cutout higher. Some packers are full for the week already. Cash will be called firm today after trading higher yesterday. Futures rallied early yesterday but seemingly failed to hold and all contracts closed well off the session highs. Front month Oct finished 135 points off the session highs. Approaching the fall runs I am not bullish. Risk hedges in the Oct to a close above 5520.
CORN AND SOYBEANS
Both corn and soybean futures traded higher overnight in reaction to the sharp decline in crop condition ratings. Overall, the entire Midwest is going to receive rainfall over the next week to ten days. These rains, if they materialize, will benefit the soybean crop. Rain at this juncture will not help the corn crop. Dec corn gapped higher and has formed a 31-day island bottom. Impressive. CORN PRICES HAVE BOTTOMED.
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