DTN Closing Livestock Comments

GENERAL COMMENTS:

Cash cattle markets started to develop Wednesday, starting with the Fed Cattle Exchange Auction report today listed a total of 6,220 head, with 3,616 actually sold, and 2,604 head listed as unsold. The state-by-state breakdown looks like this: KS 533 head at $119.75 to $120.25; NE 2,309 head at $115.00 to $119.00; TX 575 head, at $120.25 to $120.50; CO 95 head at $119.00; IA no test; other states (OK, MN) 104 head at $118.00 to $119.75. The weighted average was $117.60, down from last week's weighted average of $118.82. Additional feedlot trade started to develop through the afternoon at $120 per cwt in the South. Activity in the North is still quiet. Asking prices remain at $122 and higher in the South and $194 to $195 per cwt in the North. According to the closing report, the national hog base is $2.73 higher compared with the Prior Day settlement ($63.00 to $72.00, weighted average $70.04). The corn trade turned higher in light activity. March futures posted a 2-cent gain Wednesday. The Dow Jones Index is 35 points lower with the Nasdaq up 8 points.

LIVE CATTLE

Early mixed trade in live cattle futures quickly turned sharply lower with active liquidation seen in all areas. Pressure has developed in nearby contracts more aggressively although all contracts turned lower ($0.30 to 1.75 Lower). April futures led the complex lower with a $1.75 per cwt loss, closing at $114.75 per cwt. Front-month February futures posted 90-cent losses, although much of the trading session caused trade prices to remain near unchanged. The overall swift liquidation across the complex continues to add to the uncertainty in the market and continues to keep price spreads wide between nearby and deferred contracts. This is putting significant premiums in nearby contracts as deferred futures remain at $101 to $105 per cwt. Beef cut-outs: lower, $1.29 lower (select, $186.49) to down 0.53 (choice, $189.43) with light demand and offerings (103 loads of choice cuts, 35 loads of select cuts, 5 loads of trimmings, 22 loads of coarse grinds).

THURSDAY'S CASH CATTLE CALL

Steady to $2 Higher. Light trade developed in the South at $120 per cwt, pushing prices over $1 per cwt higher from last week. Active trade is still expected to be pushed back until sometime Thursday or Friday, but the ability to sustain higher prices is expected to give feeders even more momentum during the end of the week.

FEEDER CATTLE

Sharp losses quickly developed through the end of the trading session Wednesday ($0.65 to $1.92 lower) despite the ability for traders to hold market levels generally steady through the morning. Nearby contracts all posted triple digit losses, closing in a narrow price range of $122 to $123 per cwt. The overall lack of support in live cattle futures has quickly caused buyers who were previously aggressive early in the week to start liquidating positions once again. CME cash feeder index: 2/7: $127.28, up $0.22.

LEAN HOGS

Trade volume Wednesday remained extremely choppy with prices moving all over the board ($0.57 lower to $0.97 higher). Front-month February futures posted a strong market rally, pushing price to triple-digit gains at times through the trading session, but settling 97 cents per cwt higher at $73.50 per gallon. Even though front-month futures continue to expand the trading range higher, there remains concerns about support in other nearby and deferred contracts. Carcass value are slightly lower. Primals were mixed in a generally narrow range from 84 cents lower to 89 cents higher. This placed most support on gains in the Picnic and Rib cuts. Pork cut-out: $85.23 down $0.15. CME cash lean index for 2/06: $71.45, up $0.50. DTN Projected lean index for 2/7: $72.19, up $0.74).

THURSDAY'S CASH HOG CALL

Mixed. Packers are expected to continue with a generally stable market move as they continue to fuel aggressive procurement levels of 440,000 once again on Thursday. The tightness in packer margins continues to limit overall cash spending activity, but in order to gain needed hog numbers, it is expected that most bids will remain steady to firm. Saturday runs are expected to be near 153,000 head.

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

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