DTN Early Word Livestock Comments
A Shorter Trading Day Will Not Lack Volatility
Cattle: Lower Futures: Mixed Live Equiv: $268.72 -$0.98*
Hogs: Lower Futures: Higher Lean Equiv: $100.36 +$2.00**
*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
Cattle futures found support on Wednesday, possibly from a combination of things. The comments by Secretary of Agriculture Brooke Rollins about when the reopening of the Mexican border to feeder cattle takes place in the future are that it will be opened in stages and not all ports at once. That may have had some influence, but not much, as that is how they opened the border last time, and that would make logical sense. More in likely, it was the combination of some short covering ahead of the holiday period and futures holding a substantial discount to the level at which cash cattle have traded for the week. Northern dressed cattle traded as much as $15.00 lower, with Southern live cattle as much as $9.00 lower. This is the largest weekly cash decline we have seen in a long time. It isn't easy to anticipate the movement of futures today based on the volatility seen so far this week. It is also an abbreviated trading day. Boxed beef prices were lower with choice down $1.81 and select down $0.42.
Hog futures posted a strong day on Wednesday with the strongest one-day gains since Nov. 10. The market may be building support, causing short covering to take place ahead of the holiday season and the end of the month. It is uncertain whether that will continue today, with packers likely having sufficient hogs purchased for the week. The National Daily Direct Afternoon Hog report on Wednesday showed cash up $1.85. Pork cutout values jumped $2.00 with higher prices in all cutout categories. The weekly hog weights increase again, with the average weight up 0.9 pounds from the previous week.
| BULL SIDE | BEAR SIDE | ||
| 1) | Even with sharply lower cash for the week, cattle futures showed a significant discount. | 1) | The remarks by Rollins were nothing outside of what would be logical with the border reopening. The strength on Wednesday may be overshadowed by uncertainty. |
| 2) | Even though Secretary of Agriculture Brooke Rollins talked about the Mexican border, there is no date for its reopening anytime soon. | 2) | Significantly lower cash this week might keep pressure on the market with increases in futures being selling opportunities. |
| 3) | Hog futures found support from an oversold market and positive fundamentals. Low prices may finally be curing low prices. | 3) | Weekly hog weights continue to increase, with last week showing a gain of 0.9 pounds, averaging 293.4 pounds, up 4.9 pounds from a year ago. |
4) | Hog futures seem to be building a base, providing traders with more confidence to buy into the market for the long term. | 4) | The hog market has yet to find consistency in underlying cash and cutouts. The market may have limited upside potential until this develops. |
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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