DTN Closing Livestock Comments

Cattle Futures Continue to Turn Lower Tuesday

Rick Kment
By  Rick Kment , DTN Analyst
(DTN file photo)

GENERAL COMMENTS

Cash cattle markets are generally quiet Tuesday with bids starting to slowly develop through the end of the afternoon in Nebraska. A handful of steers were reported traded in Iowa from $203 to $215 dressed basis, which is not enough to give a good test to the market for the week. But it will hopefully get the ball rolling. According to the closing report, the national hog base is $1.36 higher compared with the Prior Day settlement ($66.00-$73.00, weighted average $71.28). The corn futures remained steady to slightly higher in light activity. May futures were unchanged Friday. The Dow Jones Index is 4 points lower with the Nasdaq up 20 points.

LIVE CATTLE

Live cattle futures settled in a narrow range (0.32 to $0.55 lower) as traders backed away from early losses through the end of the session. The overall lack of follow-through pressure Tuesday is evident in the lack of volume. Traders remain focused on the potential for market stability, which could help to bring about increased buyer activity Wednesday. Even though June futures closed under $122 per cwt, which creates concerns of additional market erosion, the ability of nearby and deferred contracts to give back most of the contract losses at closing bell is pointing toward traders attempting to create market structures near $122 per cwt in June futures. Beef cut-outs: mixed, $1.11 lower (select, $224.39) to up 0.48 (choice, $249.88) with moderate demand and heavy offerings (43 loads of choice cuts, 42 loads of select cuts, 20 loads of trimmings, 15 loads of coarse grinds).

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WEDNESDAY'S CASH CATTLE CALL:

Steady $2 lower. Activity early Wednesday should remain sluggish with a few starter bids developing late Tuesday that were unable to get much interest. This could further delay activity until later in the week if overall futures trade sees nothing more than light activity over the next couple of days. Packers will need to gain access to additional numbers, but a wide gap between asking prices and bids will likely continue through much of Wednesday.

FEEDER CATTLE

Follow-through losses have developed in all feeder cattle futures ($0.92 to $1.57 lower) with triple-digit drops in most contracts. May and August feeder cattle futures led the market lower, each losing $1.57 per cwt. The lack of follow-through volume pulled prices off session lows early Tuesday morning as losses reached nearly $3 per cwt lower with aggressive softness quickly developing in nearby contracts. CME cash feeder index: 5/15: $142.20, down $0.78.

LEAN HOGS

Sharp gains quickly developed through lean hog futures as May expired and June took over as front-month contract, leaving prices firmly higher in nearby contracts. Trade posted steady moves ($0.10 to $1.47 higher) with the most support developing in front-month June contracts. June through August contracts moved above $78 per cwt as prices continue to test resistance levels seen in March. The focus on firming fundamental support and expected pork trade support over the near future has the potential to draw additional longer-term buyer interest, although there continues to be additional uncertainty if prices can move above $80 per cwt in the near future. Carcass values are firmly higher. Light losses in loins and hams were quickly overshadowed by strong, triple-digit gains in most other primals. Pork cut-out: $85.08 up $1.11. CME cash lean index for 5/12: $71.94, up $1.31. DTN Projected lean index for 5/15: $73.01, up $1.07.

WEDNESDAY'S CASH HOG CALL

Steady to $1 higher. Firm support is expected to develop Wednesday as packers secure additional procurement needs not only for midweek runs but the end of the week. Bids are expected to remain steady to $1 per cwt higher, although most bids are likely to be 50 cents per cwt higher. Wednesday runs are expected to reach 438,000 head as Saturday levels are likely to approach 80,000 head.

For more from John, see www.feelofthemarket.com

(CZ)

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Rick Kment