DTN Midday Livestock Comments

Aggressive Losses Continue in Cattle Trade

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Russ Quinn)
GENERAL COMMENTS:

Cattle markets are leading the entire livestock market lower as aggressive late-week pressure quickly flooded into the market. This may bring increased softness to the entire cattle complex not only through the end of the week, but could influence trade activity through the rest of January. Hog futures remain under light pressure due to pressure in cattle trade. Corn prices are steady to lower in light trade. March corn futures are 1/4 cent lower Friday. Stock markets are higher in light trade. The Dow Jones is 82 points higher while Nasdaq is up 40 points.

LIVE CATTLE:

Live cattle futures are sharply lower, though prices have pulled back slightly from the session lows set earlier in the trading day. Nearby contracts are holding losses of $2.50 to $2.70 per cwt, although volume has remained sluggish through the entire Friday trading session. This is helping to draw additional market activity to the complex but is likely to keep prices under pressure through the rest of the session. February futures have now broken below the $120 per cwt, and a close at these price levels would create some uncertainty in the market, which could limit additional buying activity early next week. Cash cattle trade has started to develop Friday morning following the aggressive downward push in futures trade. This has brought light-to-moderate trade in all areas with prices generally steady to $1 per cwt lower than last week. Prices seen through the morning are listed at $122 live basis and $195 per cwt dressed. It is expected that some additional trade will need to develop before the end of the day. But the tone of the market is likely to have already been set, and future sales Friday afternoon may fall in line with current market prices. Boxed Beef cut-outs at midday are higher, $1.51 higher (select) and up $0.61 per cwt (choice) with light movement of 57 total loads reported (31 loads of choice cuts, 9 loads of select cuts, no loads of trimmings, 17 loads of ground beef).

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FEEDER CATTLE:

Follow-through pressure quickly developed in feeder cattle futures, which led markets to focus on increased market pressure and the potential to liquidate additional market support. Nearby feeder cattle futures are holding losses of $2.50 to $3.50 per cwt, but have backed away from session lows near $4 per cwt lower as traders seem to be trying to find a moderate middle ground heading into the weekend. There is likely to be some additional uncertainty early next week as traders move back into the complex and not only establish the tone of the market through the rest of January, but focus on increased fundamental market activity through the winter and spring months.

LEAN HOGS:

Limited trade activity is seen in lean hog futures with very little additional direction developing across the complex. There is likely to be some more markets shifts seen early next week as the strong pressure in cattle trade and uncertainty about maintaining recent gains in hog futures continues to draw traders back to the market. But the light activity will potentially allow prices to wander into closing bell near the current market price levels. Nearby futures are holding losses of 10 to 15 cents per cwt, while deferred futures are seen 20 to 50 cents lower in very light trade. Cash prices are higher on the National Direct morning cash hog report. The weighted average price is up $1.49 at $64.15 per cwt with the range from $59.50 to $66.00 on 5,155 head reported sold. Cash prices are higher on the Iowa/Minnesota Direct morning cash hog report. The weighted average price is up $1.96 at $65.32 per cwt with the range from $59.50 to $66.00 on 3,160 head reported sold. The National Pork Plant Report posted 180 loads selling with carcass values slipping $0.53 per cwt. Lean hog index for 1/03 is at $63.63 up $0.88 with a projected two-day index of $64.22, up $0.59.

Rick Kment can be reached at rick.kment@dtn.com

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Rick Kment