DTN Midday Livestock Comments

GENERAL COMMENTS:

Triple-digit price shifts have quickly overcome the livestock complex Wednesday morning. Triple-digit gains seen in nearby live cattle futures have pushed front-month February futures over $2.50 per cwt higher based on fundamental support. The lean hog futures complex on the other hand is seeing triple-digit losses in all 2017 contracts as traders are quickly backing away from previous support that has developed through the month of February. Corn prices are steady to higher in light trade. March corn futures are 1 1/2 cent higher. Stock markets are mixed in light trade. The Dow Jones is 16 points higher while Nasdaq is down 6 points.

LIVE CATTLE:

Strong commercial support is flooding back into the live cattle complex with prices in front month February contracts quickly surging to triple-digit gains during the morning. Currently front month futures are holding a $2.60 per cwt rally. This support comes as a combination of follow-through support developed Tuesday as well as firming cash and boxed beef values. April futures are also holding triple-digit gains, although the significantly larger open interest in April contracts is limiting the overall price volatility to a degree. February futures are trading at $121.70 per cwt, with April contracts nearing $117 per cwt at midday. Cash cattle trade is starting to develop late Wednesday morning in with both the Fed Cattle Exchange trading and feedlot trade starting to develop. Feedlot trade is reported at $125 live basis and $195 dressed basis. Although at this point trade remains extremely light, prices are $5 to $6 per cwt higher from last week's level giving the indication of continued support through the upcoming days. The Fed Cattle Exchange Auction report today listed a total of 3,350 head, with 3,065 actually sold, and 285 head listed as unsold. The state by state breakdown looks like this: KS 378 head at $122.50-$123.00; NE 1,890 head at $120.00-$123.25; TX 797 head, at $121.25-$124.50; CO no test; IA no test; other states no test. The weighted average was $122.10, up from last week's weighted average of $119.04. Beef cut-outs at midday are higher, $0.60 higher (select) and up $2.37 per cwt (choice) with moderate movement of 96 total loads reported (64 loads of choice cuts, 16 loads of select cuts, no loads of trimmings, 16 loads of ground beef).

FEEDER CATTLE:

Light gains are holding across the feeder cattle market at midday despite the aggressive underlying support seen in live cattle markets. This support from live cattle trade has pushed prices back to the positive level for the day, but with overall lack of strong longer-term buyer support and uncertainty as to how the end-of-week release of the cattle on feed report will affect placements, most traders remain cautious. Front-month March futures are holding a 22 cent gain, with the full range of the market seen from 20 to 50 cents per cwt higher through the morning.

LEAN HOGS:

Lean hog futures are holding sharp triple-digit losses as sellers quickly moved into both nearby and deferred contract months. Front month April futures are holding the most aggressive pressure, with losses seen at $2.17 per cwt through late morning. All contracts through February 2018 are now holding triple digit losses with traders not only concerned about further liquidation through the futures trade, but also recent weakness seen in cash and wholesale pork values. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $1.11 at $71.63 per cwt with the range from $66.00 to $74.00 on 3,919 head reported sold. Cash prices are lower on the Iowa Minnesota Direct morning cash hog report. The weighted average price fell $0.64 at $72.91 per cwt with the range from $66.00 to $74.00 on 1,079 head reported sold. The National Pork Plant Report reported 225 loads selling with prices down $1.48 per cwt. Lean hog index for 2/20 is at $77.24 up $0.17 with a projected two-day index of $77.64 up $0.40.

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

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