DTN Midday Livestock Comments

GENERAL COMMENTS:

Sharp cattle market losses are being led by the aggressive price pressure developing in feeder cattle trade. Most feeder cattle contracts are trading $2 per cwt lower or greater, although prices have backed away from session lows at midday. This softness in feeder cattle markets and lack of follow through buyer interest has allowed all but front month February live cattle futures to trade $1 per cwt or greater at midday. Hog markets are firming as short covering is moving back into the market at the end of the week. Corn prices are lower in light trade. March corn futures are 1 3/4 cents lower. Stock markets are lower in light trade. The Dow Jones is 36 points lower while Nasdaq is down 10 points.

LIVE CATTLE:

The tone of the cattle market has quickly changed Friday as aggressive losses are seen in all but front month February contract months. February futures, which are lightly traded with dwindling open interest before expiration at the end of the month are steady. All other contracts are holding triple-digit losses at midday. The combination of sharp pressure quickly developing across feeder cattle trade as well as the inability for significant support to develop in deferred live cattle contracts through the week has quickly pushed prices lower. There is also some pre-report positioning being done in front of the cattle on feed report released Friday afternoon. Overall cattle on feed numbers are not expected to change significantly from year ago levels, although placements are likely to see a strong bump. Cash cattle markets appear to be done for the week with no additional bids surfacing since moderate to active trade was seen on Wednesday. At this point, most cattle still on show lists will likely be rolled over to next as packers and feeders try to assess needs through early March. Beef cut-outs at midday are higher, $2.52 higher (select) and up $2.24 per cwt (choice) with light movement of 68 total loads reported (41 loads of choice cuts, 13 loads of select cuts, 4 loads of trimmings, 11 loads of ground beef).

FEEDER CATTLE:

Sharp losses have flooded into the feeder cattle futures market with triple digit losses seen across the entire complex. Even though price levels have backed away from early session lows, the tone of the market has quickly weakened given the strong buyer interest seen in live cattle markets through much of the week. March feeder cattle futures are holding losses of $1.95 per cwt at midday, while the April contracts are holding pressure of $2.35 per cwt. Increased concern surrounding the upcoming cattle on feed report and the potential for strong placement increases is adding to market pressure.

LEAN HOGS:

Light late-week buying is slowly trickling into the lean hog complex following the overall lack of support seen in the market during the morning. Short coving is being seen in nearby contracts with prices posting gains of 20 to 60 cents per cwt. The combination of sharp losses seen in cattle trade as well as firmness in pork cutout values at the end of the week has brought additional focus on unwinding price spreads between the cattle and hog complex which have developed earlier in the week. Deferred contracts remain under light to moderate pressure, but overall light volume in all markets is likely to spark increased market shifts. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $2.46 at $68.27 per cwt with the range from $63.00 to $69.19 on 2,315 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 113 loads selling with prices up $2.32 per cwt. Lean hog index for 2/22 is at $77.73 up $0.09 with a projected two-day index of $77.39 down $0.34.

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

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