DTN Midday Livestock Comments

GENERAL COMMENTS:

Market shifts in both cattle and hog futures continue to create wide ranging market shifts through the complex. February live cattle trade remains sharply higher following steady buyer support in front month contracts. Triple-digit losses have developed in all but one lean hog contract, leaving additional pressure to develop through the complex. Corn prices are lower in light trade. March corn futures are 4 cents lower. Stock markets are mixed in light trade. The Dow Jones is 56 points higher while Nasdaq is down 26 points.

LIVE CATTLE:

Sharp gains continue to hold in front-month February futures which has pushed contract prices to $122.75 per cwt at midday. February contracts are the only contract month to hold a triple-digit rally at this point, with buyer support quickly evaporating through the rest of the market. Even though April and June contracts are holding firm gains, trade in deferred contracts is mixed from 2 cents lower to 25 cents higher, creating longer-term market uncertainty in the complex. February futures expire next week, but the volatility in the front-month contract continues to spark additional market interest for the time being. Cash cattle activity is quiet through the morning and likely done for the week in most areas. There is the potential for some clean up trade to develop, especially in the North through the end of the week, but prices are expected to have already been set, with very little market development expected from here on out. With prices $5 to $6 per cwt higher than last week's levels, and active trade seen in all areas Wednesday, any movement in market shifts are likely to be minimal. Beef cut-outs at midday are higher, $1.73 higher (select) and up $1.58 per cwt (choice) with moderate movement of 86 total loads reported (52 loads of choice cuts, 7 loads of select cuts, 10 loads of trimmings, 17 loads of ground beef).

FEEDER CATTLE:

Feeder cattle futures have been surprisingly unaffected by the aggressive market surge in live cattle futures over the last couple of trading sessions. Feeder cattle futures remain mixed in a narrow trading range from 10 cents lower to 22 cents higher. The overall lack of direction and recent stability in the feeder cattle market is focusing more on the lack of market shifts in deferred live cattle trade and the ability to bring additional trader volume to the complex through the next several months.

LEAN HOGS:

Strong triple-digit losses have redeveloped across the lean hog futures complex. The aggressive pressure in the market has been most evident in front month April futures with losses seen at $1.40 per cwt. This has pushed prices to $66.32 per cwt as traders continue to remain concerned about the underlying support in the pork market. All contracts except February futures have posted losses over $1 per cwt at midday, which may spark additional liquidation through the end of the week. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $1.25 at $71.14 per cwt with the range from $65.00 to $72.00 on 3,793 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 166 loads selling with prices up $2.19 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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