DTN Closing Livestock Comments

Sharp Losses in Feeder Cattle, Lean Hog Futures Tuesday

Rick Kment
By  Rick Kment , DTN Analyst
(DTN file photo)

GENERAL COMMENTS: Lean hog and feeder cattle futures saw sharp losses Tuesday morning as traders found little to no support from meat values in the morning reports. Additional strength in grains points to higher production costs, adding even more bearishness to livestock markets. Cash cattle markets remained quiet Tuesday with little to no additional direction seen from either side. Bids and asking prices remain hard to pin down, which could delay overall trade until later in the week. The recent shift toward Wednesday trade in the South has some looking for both sides to become more aggressive Wednesday morning. Recent weakness in futures trade is likely to limit cash market support in the near future, although feedlot managers are not likely to fold easily this early in the week. The National Daily Direct afternoon hog report was $0.11 lower ($72-$83, weighted average $80.91) on 15,361 head sold. Corn futures posted moderate gains in light trade with July up 5 1/4 cents per bushel. The Dow Jones Index was 197 points higher with the Nasdaq up 83 points.

LIVE CATTLE: Firm pressure developed in the live cattle trade late Tuesday. Futures closed $0.20 to $0.50 lower. The live cattle market was the most stable livestock market Tuesday, but that's not saying much when both feeder cattle and lean hogs saw triple-digit losses. Cattle on Feed report estimates being circulated Tuesday predict a bearish on-feed number in Friday's report, but expected demand strength helped limit losses in futures. Softness is still likely in live cattle futures if pressure continues in feeder cattle. But with markets in the current range, the downside potential of live cattle futures is limited due to expected demand and potential buyers willing to re-own positions at these levels. Beef cut-outs were unavailable at the time these comments were posted.

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WEDNESDAY'S CASH CATTLE CALL: Steady. Sluggish activity is expected early Wednesday following bids and asking prices remaining undeveloped at this point. Packers are expected to show limited interest Wednesday, but this could allow for limited trade midweek given the trend in the South over the last several weeks.

FEEDER CATTLE: Active selling pushed most feeder cattle futures contracts triple digits lower. The full range of closes was $1.77 lower to $0.22 higher. Traders continued to liquidate positions Tuesday. The August contract closed $1.77 per cwt lower, down $2.50 so far this week on rising corn futures and expectations that growing supplies will add increased liquidation during late May. Early estimates for Friday's Cattle on Feed report put April cattle placements at 114% of last year's level. Even though 2018 posted lighter placements in the May report, the expected increase of cattle moving into feedlots would become burdensome to the market. CME cash feeder index for 5/20 is $132.17, down $0.65.

LEAN HOGS: Hog futures fell late Tuesday as noncommercial traders added to further liquidation. Futures settled $0.12 to $1.97 lower. Triple-digit losses developed in nearby contracts as traders focused more on short-term market shifts rather than long-term demand potential. The combination of expected strong global demand and current trade dispute with China is making it hard for traders to choose a longer-term direction. Limited cash market support is also causing traders to steadily back away from previous support seen last week. Even with the current market pressure, lean hog trade remains well entrenched in a sideways pattern due to the wide market swings over the past month. Pork cutouts shifted higher following wide market swings in both direction through the pork complex. Pork cutout values added $0.54 per cwt, moving to $87.07 per cwt on 341 loads. CME cash lean index for 5/17 is $84.59, unchanged. DTN Projected lean index for 5/20 is $84.37, down $0.22.

WEDNESDAY'S CASH HOG CALL: Steady to $1 lower. Continued pressure is expected midweek in cash hog prices as packers attempt to further reduce spending levels given the lack of follow-through support in futures and pork cutout values. Wednesday's slaughter is expected at 471,000 head. Saturday runs are expected near 43,000 head.

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

(AG)

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Rick Kment