DTN Closing Livestock Comments

Strong Gains Develop in Cattle Futures

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

GENERAL COMMENTS

Cash cattle markets remain generally sluggish late Tuesday with just a few token bids have developed in the South. These early bids are set at $114 per cwt, and likely not going to gain any attention from feedlot managers at this point in the week. Asking prices are still hard to pin down in most areas, although more definition should develop through the day Wednesday. According to the closing report, the national hog base is $0.72 lower compared with the prior day settlement ($51-$59.20) weighted average $58.15. The corn futures moved lower in light activity. March futures were 1 cent lower Tuesday. The Dow Jones Index is 134 points higher with the Nasdaq down 10 points.

LIVE CATTLE

Triple-digit gains developed in most contract months with firm market support seen across the entire market ($0.87 to $1.42 higher). Once traders moved back into the market following the recent pullback in all cattle markets, strong gains quickly flooded into nearly all contracts. Even though prices closed with triple-digit gains in most markets, the pullback from session highs is putting more emphasis on the potential for additional market support later in the week. Beef cut-outs: mixed, $0.26 higher (select, $185.92) and down $1.47 (choice, $204.06) with light-to-moderate demand and offerings (63 loads of choice cuts, 24 loads of select cuts, 30 loads of trimmings, 17 loads of coarse grinds).

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WEDNESDAY'S CASH CATTLE CALL:

Steady. Activity early Wednesday is expected to be quiet as the overall lack of direction following the strong futures rally may limit overall interest in both sides. The fact that The Fed Cattle Exchange Auction will trade Wednesday morning could give some additional definition to the complex, although active trade is not expected until later in the week.

FEEDER CATTLE:

Aggressive and active buying flooded into the market with feeder cattle futures posting triple-digit gains Tuesday ($0.87 to $1.97 higher). The ability for traders to not only move back into the cattle market Tuesday but to become so active and push prices nearly $2 per cwt higher in many nearby contracts is sparking widespread underlying support in all markets. There is additional follow-through buyer interest that may quickly develop midweek as traders try to build off of the recent success. CME cash feeder index for 12/11 is $153.89 down $0.43.

LEAN HOGS:

Firm pressure redeveloped in lean hog futures as most contracts turned lower ($0.62 Lower to $0.15 higher). Front-month December contracts were the only contract to pull out a gain at the end of the trading session due to overall light activity in spot month trade. The rest of the market posted losses as nearby contracts traded in a uniform pattern of 50 to 60 cents per cwt lower. The overall lack of support follows the triple-digit losses seen Monday as traders continue to quickly back away from strong market support seen last week. Carcass values weakened Tuesday solely on the aggressive $11-per-cwt loss in belly values, while all other primals posted strong triple-digit gains. Pork cut-out: $81.12 down $0.57. CME cash lean index for 12/8 $65.17, down $0.31. DTN Projected lean index for 12/11 $64.97 down $0.20.

WEDNESDAY'S CASH HOG CALL:

Steady to $1 lower. Early trade Wednesday morning is expected to follow the same trend seen early in the week with bids ranging from steady to $1 per cwt lower, although the general tone of the market is likely to be steady to weak. Packers will continue to have ready access to market ready hogs and the fact that many processors are at or near capacity through the day is likely to limit overall cash markets. The recent pullback in futures trade also has put a damper on the ability for cash markets to remain stable. Plant runs are expected to hit 465,000 once again with a total of 241,000 expected Saturday.

John A. Harrington can be reached at john.harrington@dtn.com

(BE)

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Rick Kment