DTN Midday Livestock Comments

Cattle Futures Expand Gains Wednesday Morning

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

Firm support continues to quickly develop in nearby live cattle and feeder cattle futures. The firm support has broken through short term resistance levels and moved above October highs. Lean hog futures have started to erode due to light volume with nearby contracts holding light to moderate pressure at midday. Corn prices are higher in light trade. December corn futures are 5 cents higher per bushel. Stock markets are mixed in light trade. The Dow Jones is 50 points higher while Nasdaq is down 21 points.

LIVE CATTLE:

Firm buyer support has stepped back into nearby live cattle futures late Wednesday morning as traders continue to focus on the oversold status of the complex. Lack of volume during early trade left markets generally unsupported and prices wandering in a narrow range and lower price range, but once initial pressure washed through the complex, buyer support quickly immerged, pushing prices 60 cents to $1 per cwt higher as traders continue to look at long term demand support and the potential that supplies may remain tight over the next several months. Cash cattle activity remains quiet although there are a few suggestions that cattle may be priced near $105 in the South and $162 and higher in the North. It has been hard to pinpoint feedlot managers' willingness to put their foot on base at this point given the support in futures trade and sliding scale that may be possible through the end of the week. Trade is expected to develop sometime Thursday or Friday and it may be quick to develop once activity starts. Beef cut-outs at midday are mixed $0.53 lower (select) and down $0.41 per cwt (choice) with active movement of 108 total loads reported (34 loads of choice cuts, 33 loads of select cuts, 15 load of trimmings, 26 loads of ground beef).

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FEEDER CATTLE:

Strong midday support has stepped back into feeder cattle futures with November contracts leading the move higher with triple-digit gains. The ability to bring additional buyer support in the November contracts as prices are hovering near $124 per cwt is helping to focus on further tightness of supply through the end of the calendar year as traders remain focused on the ability to put more product into feed yards and the ability to potentially sustain demand long term. Volume through the morning Wednesday has remained light, although consistency through most of the morning has helped to bring firm buyer support back to the complex following price pressure Tuesday and sluggish early trade Wednesday morning.

LEAN HOGS:

Lack of buyer support redeveloping through the morning has allowed prices to move from single digit mixed trade early in the session to moderate losses through nearby contracts at midday. December through April contracts are holding 10 to 45 cent losses as traders are slowly backing away from the aggressive triple digit gains that have pushed prices over $3 per cwt higher in the last few days. At this point the move is considered nothing more than a market correction, but it is being watched closely by traders as it could quickly turn into something much more as previous market reversals have taken place in the recent past. The ability to stabilize market fundamentals over the near future will need to develop in order to sustain buyer support, and bring additional commercial interest back into the complex. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.72 per cwt to $44.67 per cwt with the range from $43.50 to $46.00 on 5,795 head reported sold. Cash prices are unreported due to confidentiality on the Iowa Minnesota Direct morning cash hog report. The National Pork Plant Report reported 250 loads selling with prices slipping $0.11 per cwt. Lean hog index for 10/24 is at $51.67 down $0.18 with a projected two-day index of $51.70 up $0.03.

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

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Rick Kment