DTN Closing Livestock Comments

Additional Pressure Sweeps Through Feeder Cattle Complex

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

GENERAL COMMENTS

Cash cattle markets remained inactive Friday with packers seemingly content with the light trade that developed over the last several days. Trade this week was spread over three days and really never hit a strong stride on any day as the sharp losses in futures trade was the main focus of the market and quickly limited interest on both sides. Packers should be short-bought going into the weekend, but that may not add significant motivation to speed up the process. According to the closing report, the national hog base is $0.10 lower with the prior day settlement ($53-$60, weighted average $59.10). From Friday to Friday, livestock futures scored the following changes: Dec LC up $1.65; Feb LC off $3.67; Jan FC off $5.10; Mar FC off $14.70 Dec LH off $1.60; Feb LH off $1.87. March futures were 1 cent higher Friday. The Dow Jones Index is 84 points higher with the Nasdaq up 27 points.

LIVE CATTLE

Cattle trade remained sluggish through most of the Friday trading session with prices closing mixed in a narrow-to-moderate trading range ($0.47 lower to $0.10 higher). Although most contracts settled lower after generally sluggish market activity during both morning and afternoon trade, the focus on lower feeder cattle prices sparked the majority of market softness. Traders seemed encouraged by the firmness in the morning boxed beef report. But this may not be enough to spark additional longer-term support, as traders will reassess market conditions early Monday morning before stepping back into the complex. But current ranges may have been developing over the last couple of days, as aggressive liquidation has been limited. Beef cut-outs: higher on choice and select (select $185.97, up $2.14, and choice $205.59, up $0.51) with light demand and heavy offerings (104 loads of choice cuts, 26 loads of select cuts, 30 loads of trimmings, 36 loads of coarse grinds).

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MONDAY'S CASH CATTLE CALL:

Steady. Given the fact that cash cattle trade this last week essentially trickled in through most of the week, early week activity next week is unexpected. Monday market activity will likely be limited to show list distribution and inventory-taking as traders try to focus on the amount of market-ready cattle that need to leave feedlots. With the holidays fast approaching and limited processing schedules during that time, packers and feedlot managers continue to try to project future needs in the weeks ahead.

FEEDER CATTLE:

Strong triple-digit losses moved into nearby feeder cattle futures at closing bell Friday afternoon. This eroded any sense of early session support and created additional pressure in chart markets at the end of the week ($0.67 to $1.17 lower). Front-month feeder cattle futures have fallen over $10 per hundredweight (cwt) since late November, while other nearby contracts also posted aggressive market pressure. The potential to create market stability in the market seems very distant at this point, leaving many traders to wonder just how much additional technical market pressure will develop. CME cash feeder index for 12/07 is $154.40 down $0.61.

LEAN HOGS:

Firm buyer support moved into the lean hog futures complex late in the session with all markets moving higher ($0.10 to $0.97 higher). The overall support in the complex continues to draw increased underlying market support and could limit additional pressure early next week. But even though prices shifted higher, the losses seen over the last 10 days have created market uncertainty over the next several days and weeks. Carcass values firmed at the end of the week with additional longer-term support potentially moving into the market following active buyer interest. Prices moved higher in all primals except rib and belly markets one again. Pork cut-out: $83.70 up $0.52. CME cash lean index for 12/6 $65.30, up $0.45. DTN Projected lean index for 12/07 $65.48 up $0.18.

MONDAY'S CASH HOG CALL:

Steady. Very little market direction has been seen at the end of the week with overall cash values trying to keep up with the recent shift in futures trade. Packers are expected to start out aggressively once again next week with an estimated procurement run of 465,000 head. The ability to maintain this pace day after day is impressive, but there will likely continue to be some days, similar to this past week where plant breakdowns will cause packers to shift overall schedules to the end of the week. Most bids are expected to remain steady, although the range may widen early in the week.

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

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Rick Kment