DTN Midday Livestock Comments

GENERAL COMMENTS:

Strong gains have flooded through cattle futures Tuesday morning following gains in feeder cattle markets which reached $3 per cwt through the morning. This is helping to draw gains as strong as $2 per cwt in many live cattle contracts. Lean hog futures remain under pressure as nearby contracts are holding triple digit losses. Corn prices are lower in light trade. September corn futures are 2 cents lower. Stock markets are higher in light trade. The Dow Jones is 161 points higher while Nasdaq is up 75 points.

LIVE CATTLE:

Strong triple-digit gains have surged into the complex with gains following the aggressive morning support seen in the feeder cattle futures. Triple-digit price moves are seen in nearly all contracts with traders focusing on the potential to square positions following the recent price pressure. Continued softness in fundamentals may lead to additional market softness long term, but the shift higher Tuesday is giving traders a reprieve from the consistent weakness over the last couple of weeks. Cash cattle is starting to show some light movement with some initial bids developing in the South at $106 per cwt. This is unlikely to get much feeder attention at this point, especially given the support in futures trade, but it is a starting point. Asking prices are seen at $112 in the South and $177 in the North, but active trade may not be seen until the later part of the week. Beef cut-outs at midday are higher, $0.01 higher (select) and up $0.73 per cwt (choice) with moderate movement of 84 total loads reported (40 loads of choice cuts, 17 loads of select cuts, 17 loads of trimmings, 10 loads of ground beef).

FEEDER CATTLE:

Sharp gains quickly developed Tuesday as short covering activity moved back into the feeder cattle complex even though very little directional change was seen in the overall cattle complex. Nearby feeder cattle futures are holding gains of $2 to $3 per cwt with traders focusing on the potential to draw additional underlying support and move prices above $142 per cwt once again. It is uncertain just how long this support will last as traders remain cautious given the upcoming cattle on feed report.

LEAN HOGS:

Triple-digit losses are seen once again in nearby lean hog futures trade even though light buyer support attempted to step into the complex through morning trade. The lack of support during the morning has allowed nearby contracts to break through short-term support levels, as October futures have fallen below $64 per cwt. The potential for additional technical pressure to develop along with already existing fundamental weakness through the end of the month could bring increased softness to the entire complex. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $1.36 at $70.36 per cwt with the range from $67.00 to $71.50 on 4,506 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $0.96 at $70.60 per cwt with the range from $67.00 to $71.50 on 1,692 head reported sold. The National Pork Plant Report reported 225 loads selling with prices falling $2.43 per cwt. Lean hog index for 8/18 is at $82.35 down $0.84 with a projected two-day index of $81.53, down $0.82.

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

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