DTN Closing Livestock Comments

GENERAL COMMENTS

Cash cattle markets are quiet Wednesday afternoon following light trade that started to develop Tuesday. The sharp tumble lower in futures trade caused packers to quickly back away from early bids that started to develop earlier in the morning. This may continue to be the cash through much of the week as any aggressiveness seen in the market appears to have been washed away by the sharp market pressure over the last several days. Bids are now seen at $128 per cwt live basis and $208 dressed. Asking prices are at $132 in the South and $213 through the North. Following two weeks of technical difficulties and delays with a new website design, the Fed Cattle Exchange Auction has decided to switch sales back to their previous system. Sales will resume next week Wednesday. According to the closing report, the national hog base is $2.17 higher compared with the Prior Day settlement ($78.00-$84.50) weighted average $81.99. The corn futures moved lower in light activity. July futures were 4 cents lower Wednesday. The Dow Jones Index is 20 points down with the Nasdaq down 60 points. `

LIVE CATTLE

Widespread pressure quickly developed Wednesday morning, which led to additional strong pressure through the rest of the trading session. Triple-digit losses held during the entire trading session as traders not only focused on aggressive losses in feeder cattle markets, but also remain concerned about fundamental support in the beef markets, leaving cattle trade sharply lower ($1.87 to $3.00 lower). Nearby contracts closed limit lower, which will allow live cattle contracts to trade with extended trading limits Thursday. The ability to move contract prices $4.50 per cwt in each direction during the trading session Thursday could create additional market volatility in not only the live cattle complex, but the entire livestock market. June futures settled at $124.50 per cwt, but still remain above short-term support levels of $122.97 per cwt at the end of May. Moving below these price levels would be the first test in shifting the market lower over the next several days or weeks, and determining if these markets will be able to bounce higher once again. Beef cut-outs: lower, $0.79 lower (select, $220.66) to down $0.16 (choice, $251.03) with light demand and moderate offerings (50 loads of choice cuts, 28 loads of select cuts, 18 loads of trimmings, 14 loads of coarse grinds).

THURSDAY'S CASH CATTLE CALL:

$2 to $5 lower. Packers and feeders will move into the Thursday trading session with asking prices and bids likely remaining a world apart with the bearish outlook in futures trade quickly changing the scope of cash market outlook through the complex. This could either delay cash market trade to the very end of the week, or leave overall cattle number sold extremely limited through the week.

FEEDER CATTLE

Sharp pressure quickly flooded into the feeder cattle markets ($3 to $4.40 lower) as triple-digit losses instantly focused on moving the market lower Wednesday morning. The combination of sharp market pressure earlier in the week as well as continued pressure over the last week and a half has created uneasiness through the entire complex. In the last eight trading sessions, front-month August feeder cattle futures have lost nearly $14 per cwt as contracts are now trading near $146 per cwt. The pressure in the market is likely to continue to develop as additional liquidation is possible. Even though nearby futures posted limit losses at times during the morning, no feeder cattle contracts closed at daily trading limits. This could allow for some buyer support to step back into the market through the end of the week. CME cash feeder index: 6/13: $153.92, down $0.29.

LEAN HOGS

Mixed trade limited overall movement through the lean hog futures complex with the focus across livestock markets squarely focused on the bearish movements in cattle markets ($0.50 lower to $30 higher). Strong gains were seen in nearby contracts as July futures led the market higher with an 80-cent to $1-per-cwt rally through much of the morning focusing on strong cash market support during morning trade. But the overall lack of support in cattle markets and the resulting impact on deferred contracts quickly limited buyer interest through the rest of the complex. Trade volume is expected to remain sluggish through the end of the week, although additional volatility in cattle markets could limit price support in the hog market over the next couple of days. Carcass values trickled higher in heavy volume. Strong gains in ribs offset sharp losses in Butts. All other primals remained stuck in narrow to moderate ranges. Pork cut-out: $95.07 up $0.10. CME cash lean index for 6/12: $81.16, up $0.57. DTN Projected lean index for 6/13 $82.10, up $0.94.

THURSDAY'S CASH HOG CALL

Steady to $1 higher. Tighter supplies through market-ready hog supplies are causing packers to dig deeper into their pockets in order to gain access to hogs. This is causing some packers to reduce overall processing schedules rather than to pay the extra money in order to reduce margins and keep chain speeds at the same levels as in previous weeks. Expected slaughter numbers Thursday are expected to be 435,000 head with an estimated 51,000 head likely on Saturday. Most bids early Thursday are likely to be 50 cents to $1 per cwt higher.

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

(CZ)

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