DTN Midday Livestock Comments

Sharp Losses Move into Futures Trade Following Fundamental Pressure

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Russ Quinn)
GENERAL COMMENTS:

Sharp triple-digit losses have quickly developed through midday with live cattle futures and lean hog futures posting losses above $2 per cwt as traders continue to focus on fundamental market weakness. Continued pressure through the end of the session could spark even more liquidation Friday. Corn prices are lower in light trade. September corn futures are 2 cents lower. Stock markets are lower in light trade. The Dow Jones is 145 points lower while Nasdaq is down 69 points.

LIVE CATTLE:

The combination of strong pressure developing in cash markets and beef values Thursday morning has added even more weakness to the complex. This has created additional pressure in nearby futures with trade seen $1.70 to $2 per cwt lower at midday. The inability to draw support back into the market has broken through last week's close of $106.60 in October futures. A move below support levels of $105.50 per cwt is expected to draw additional liquidation into all cattle markets. Cash trade has redeveloped through the morning at the same range as seen earlier in the week. Live trade is seen at $110 per cwt with moderate trade seen in Kansas at that level. Dressed prices through the north are seen at $175 to $177 per cwt. It is expected that most if not all of the needed trade will be wrapped up by the end of the day, which may continue to weaken the overall tone of the complex. Beef cut-outs at midday are lower, $0.47 lower (select) and down $1.85 per cwt (choice) with active movement of 102 total loads reported (66 loads of choice cuts, 23 loads of select cuts, 1 load of trimmings, 13 loads of ground beef).

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FEEDER CATTLE:

Triple-digit losses are seen through feeder cattle trade with the most aggressive losses once again seen in deferred contract months. August futures are holding a $1-per-cwt loss with the rest of the market flirting with losses near $2 per cwt. The aggressive $3-to-$4-per-cwt losses seen Wednesday have set up an extremely bearish market situation and allowed active liquidation to continue late in the week.

LEAN HOGS:

Aggressive losses have once again developed through the complex with October futures posting a $2.07-per-cwt loss. This has pushed front-month contracts below $67 per cwt, and although markets remain in a technically sideways range, the inability to find support at current levels is bringing even more concern to the market. All nearby contracts are holding triple-digit losses, with the focus on weakness developing in cash and pork values adding to the market concerns. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $1.10 at $75.29 per cwt with the range from $70.00 to $77.00 on 3,994 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $1.20 at $75.61 per cwt with the range from $70.00 to $77.00 on 1,684 head reported sold. The National Pork Plant Report reported 133 loads selling with prices falling $0.70 per cwt. Lean hog index for 8/14 is at $84.38 down $0.40 with a projected two-day index of $84.03, down $0.35.

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

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Rick Kment