DTN Early Word Opening Livestock

Cattle Market Weakness Expected to Continue

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

Cattle: $2 to $3 LR Futures: Lower Live Equiv Unavailable*

Hogs: Steady-$1 LR Futures: Mixed Lean Equiv Unavailable**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Light to moderate trade developed in Nebraska through the afternoon Wednesday with prices seen at $187 to $188 per cwt. This is generally $2 to $3 per cwt lower than last week's price levels, and could limit additional buyer support over the near future, although trade is expected in other areas through the rest of the week. Even though the amount of cattle sold may not set the tone for the market, given overall market conditions, it is likely that the limited trade activity at $117 per cwt will potentially set the market unless a wide market shift develops in futures trade. Futures are expected to continue to move lower through the morning with the aggressive sell-off in both feeder cattle and live contracts creating limited support.

Follow-through pressure is expected to quickly develop through the lean hog futures trade following the aggressive market pullback over the last couple of trading sessions. The move lower has broken through lows set in late November, which broke through support levels. This may spark a combination of follow-through liquidation as well as short-covering during the initial trade seen Thursday. Daily hog runs are scheduled for 465,000 head with 215,000 head seen Saturday.

BULL SIDE BEAR SIDE
1) Strong end-of-the-year and holiday demand continues through the beef complex despite the recent pullback in price levels. Traders continue to focus on aggressive buyer support in all beef markets surrounding the holiday season. 1) Moderate to strong pressure continues to develop following the aggressive triple-digit losses in futures activity during the last week. This is starting to heavily impact not only cash cattle markets but also erode beef values.
2) Cash basis values have remained strong through the week. Even though the cash cattle market remains lower, the strong appetite of packers who want beef has been minimized compared to the aggressive losses in futures trade. Cash markets have shifted $2 to $3 per cwt lower while futures markets have fallen $5 to $6 per cwt over the last week. 2) Feeder cattle futures have been the leader of the recent market liquidation as traders continue to focus on overall lack of support. This has broken through most nearby support levels, leaving the complex vulnerable for additional long-term pressure.
3) Packers continue to aggressively focus on keeping plants full and moving additional pork down the pipeline. This will continue to limit the overall pressure in cash values through the next few weeks. 3) Lean hog futures have broken through the short-term support levels seen at the end of November. This has the potential to bring about additional market liquidation over the next couple of weeks.
4)

Strong pork demand continues to be seen both in domestic and export markets. This will allow for additional demand of pork despite the recent pullback in futures trade.

4) Pork values posted strong losses midweek, breaking away from the firm and steady market support over the last couple of weeks. This could bring increased market pressure over the next few days.


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

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Rick Kment

Rick Kment
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