DTN Midday Livestock Comments

GENERAL COMMENTS:

Strong gains have quickly developed through the cattle complex as aggressive triple-digit gains have flooded back into the feeder cattle market. This support is helping to drive a portion of the commercial buying activity in live cattle trade, which is pushing February contracts $1.25 per cwt higher. Lean hog futures remain mixed in light trade with traders starting to take into account the pressure in cash values. This adds even more uncertainty to the short- and long-term direction of the complex. Corn prices are lower in light trade. March corn futures are 4 cents lower. Stock markets are lower in light trade. The Dow Jones is 8 points lower while Nasdaq is down 2 points.

LIVE CATTLE:

Firm live cattle trade has developed Monday morning with gains posting strong gains in all contracts. Front-month February futures trade continues to lead the market rally higher even though overall trade and open interest remains at a minimum in the February contracts. Front-month futures are trading at $125.10 per cwt with a $1.35 per cwt rally at midday. The rest of the complex is holding 70 cent to $1.05 per cwt gains based on sliding grain markets and firmness in beef values. Cash cattle Cash market activity remains undeveloped at this point with bids and offers unavailable. There is expected to be very little interest seen until midweek or later. With the end of February just around the corner, packers and feeders may stay on the sidelines until early March. Beef cut-outs at midday are higher, $1.61 higher (select) and up $2.10 per cwt (choice) with light movement of 46 total loads reported (17 loads of choice cuts, 6 loads of select cuts, 8 loads of trimmings, 15 loads of ground beef).

FEEDER CATTLE:

Aggressive triple-digit gains have quickly developed Monday morning as traders try to cover the sharp losses that developed at the end of last week. Trade volume is expected to remain light to moderate through the day, but this is not limiting nearby contracts from holding $2 to $2.30 per cwt gains mat midday. Feeder cattle futures continue to hold a discount to the front month February live cattle futures which continues to add to the confusion in the market as feeder cattle to live cattle spreads remain uncharacteristic. The volatility in prices over the last week continues to create concerns that even wider price swings could develop through the coming days.

LEAN HOGS:

Lean hog futures are trading mixed to mostly higher in a generally narrow range through the morning Monday. Front month April lean hog futures trade is leading the complex higher with a 42-cent-per-cwt rally, although overall volume across the entire complex remains sluggish. There is additional trade likely to be seen during the last half of the session based on the movement in pork values and outside market support in cattle markets. At midday, June and July futures are unable to hold prices higher with losses of 2 to 10 cents per cwt. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $1.52 at $67.05 per cwt with the range from $62.00 to $70.00 on 3,158 head reported sold. Cash prices are lower on the Iowa Minnesota Direct morning cash hog report. The weighted average price fell $2.21 at $66.54 per cwt with the range from $62.00 to $70.00 on 273 head reported sold. The National Pork Plant Report reported 175 loads selling with prices fell $0.75 per cwt. Lean hog index for 2/23 is at $77.39 down $0.34 with a projected two-day index of $76.72 down $0.67.

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

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