DTN Midday Livestock Comments

Cattle Trade Backs Away From Early Gains

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

Mixed cattle trade has developed at midday as buyers are slowly and cautiously backing away from the strong market support seen early in the session. Sharp losses continue to be seen across the hog market, creating additional weakness through the entire complex and quickly cutting through support levels seen through the end of 2017. Corn prices are higher in light trade. March corn futures are 2 cents higher Tuesday. Stock markets are higher in light trade. The Dow Jones is 206 points higher while Nasdaq is up 2 points.

LIVE CATTLE:

Mixed trade is now seen in live cattle futures with the focus on traders trying to establish a sense of market stability following the previous losses during the week. There is likely to be some additional market shifts through the end of the session, although traders seem to be focusing on the potential for light trade through much of the session. This is likely to limit any wide shifts across the complex. Cash cattle sales are still undeveloped midweek in feedlot country, although a few more bids have developed in both the North and South on a live basis at $124 per cwt. This is not likely to get much attention at all with the firmness in futures trade and current asking prices near $130 per cwt. Dressed bids and asking prices are still undeveloped, which is likely to push trade activity into the end of the week. The Fed Cattle Exchange Auction today listed a total of 892 head, with 148 actually sold, 744 head listed as unsold, and 0 head listed as PO (Passed Offer). The state by state breakdown looks like this: KS 65 total head, with 0 head sold, 65 head unsold, 0 head listed as PO; NE 558 total head, with 0 head sold, 558 head unsold, and 0 head listed as PO; TX 269 total head, with 148 head sold at $126.00, 121 head unsold, and 0 head listed as PO; CO -- no cattle reported; IA -- no cattle reported; other states -- no cattle reported. The delivery date/weighted averages breakdown is as listed: 1-9 day delivery: 892 head total, 148 head sold, with a weighted average price of $126.00; 1-17 day delivery -- no cattle reported; 10-17 day delivery -- no cattle reported; 17-30 day delivery -- no cattle reported. Boxed Beef cut-outs at midday are higher, $0.78 higher (select) and up $1.02 per cwt (choice) with light movement of 67 total loads reported (34 loads of choice cuts, 24 loads of select cuts, no loads of trimmings, 9 loads of ground beef).

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FEEDER CATTLE:

Narrow gains are holding in feeder cattle futures as traders are trying to bring some stability back to the complex. The inability to hold moderate to strong gains in the cattle complex during the morning is leaving the entire market slightly vulnerable as it is uncertain just how much additional buyer support may develop over the end of the day. Nearby contracts are holding gains of 12 to 30 cents per cwt, although the strong support in late 2018 contracts have focused on overall lack of trade volume during late morning as the early activity still is holding prices higher.

LEAN HOGS:

Additional sharp losses have quickly developed in all nearby lean hog trade Wednesday morning. Due to the light volume and quickly shrinking open interest, spot month February contracts are showing only moderate losses. The rest of the spring and summer contracts have held triple-digit losses through most of the session. Not only are traders focusing on fundamental sluggishness through the week, but technical selling is starting to be the main driver across the market. Morning losses quickly blew through November and December lows, with the next support level seen in April contracts $68.45 per cwt, last seen in September. The inability to bring additional buyer activity to the market could move to seasonal lows and break through long term support levels. Cash prices are lower on the National Direct morning cash hog report. The weighted average price is down $0.22 at $72.38 per cwt with the range from $63.00 to $72.38 on 3,909 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price is down $0.49 at $72.09 per cwt with the range from $63.00 to $72.50 on 1,574 head reported sold. The National Pork Plant Report posted 254 loads selling with carcass values adding $0.43 per cwt. Lean hog index for 2/5 is at $74.84, up 0.36 with a projected two-day index of $75.38, up 0.54.

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

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Rick Kment