DTN Midday Livestock Comments

GENERAL COMMENTS:

Moderate buyer support has quickly moved into cattle trade Wednesday morning as traders are trying to solidify longer-term market direction and bounce off of recent lows. This support is building despite strong triple-digit losses seen in lean hog futures. The move through short-term support in nearby lean hog contracts is causing concerns of potential follow through losses through the rest of the session. Corn prices are mixed in light trade. March corn futures are 1/2 cent higher Wednesday. Stock markets are lower in light trade. The Dow Jones is 304 points lower while Nasdaq is down 56 points.

LIVE CATTLE:

Initial pressure seen in live cattle futures has been swept away by the firm buyer support quickly moving into the complex. Although prices have been unable to show sharp upward market movement, the overall tone of the complex is gaining momentum and most of all helping to bring some needed stability to the live cattle complex. It is uncertain just how much additional trade will develop over the near future, but the focus on consistent buyer activity through the entire market is keeping buyers aggressive Wednesday morning. Cash cattle activity remains sluggish with a few bids redeveloping at $126 live basis and $202 per cwt dressed basis. These live bids are at the same price level as very limited trade developed Tuesday afternoon. It is uncertain if feeders will be willing to pull the trigger at these prices, or are willing to wait for potentially higher prices at the end of the week. Asking prices are seen or projected at $128 to $130 live and $207 and higher dressed. The Fed Cattle Exchange Auction today listed a total of 474 head, with 387 actually sold, 0 head listed as unsold, and 87 head listed as PO (Passed Offer). The state by state breakdown looks like this: KS 229 total head, with 142 head sold at $126.00, 0 head unsold, 87 head listed as PO ($126.00); NE -- no cattle reported; TX 245 total head, with 245 head sold at $126.00, 0 head unsold, and 0 head listed as PO; CO -- no cattle reported; IA -- no cattle reported; other states (OK, SD, MN) -- no cattle reported. The delivery date/weighted average breakdown is as listed: 1-9 day delivery: 474 head total, 387 head sold, with a weighted average price of $126.00; 1-17 day delivery -- no cattle reported; 10-17 day delivery -- no cattle reported; 17-30 day delivery -- no cattle reported. Boxed Beef cut-outs at midday are mixed, $0.25 higher (select) and down $0.06 per cwt (choice) with moderate movement of 92 total loads reported (61 loads of choice cuts, 12 loads of select cuts, 7 loads of trimmings, 11 loads of ground beef).

FEEDER CATTLE:

Firm buyer support is holding through feeder cattle trade with increased overall support likely to carry through the end of the session. This move higher is helping to rebuild some trader confidence through early March as traders seem to be moving away from supply concerns which have impacted the market over the last several weeks, and moving the discussion back to potential demand support through the rest of the year. Prices are seen 40 to 80 cents per cwt higher with March futures still trading at a significant discount due to market seasonality.

LEAN HOGS:

Aggressive losses have quickly gained momentum through the complex Wednesday morning. The losses are led by triple-digit pressure in all nearby contracts as April through June futures are trading $1.50 to $1.70 per cwt lower at midday. This has broken through short-term support levels seen last week, and is now testing August 2017 levels in April contracts. A move and close below these levels near $66 per cwt would post year-long lows in the hog complex with prices trading at the lowest level since November 2016. Cash prices are higher on the National Direct morning cash hog report. The weighted average price is up $0.09 at $62.61 per cwt with the range from $56.00 to $63.50 on 3,726 head reported sold. Cash prices are higher on the Iowa/Minnesota Direct morning cash hog report. The weighted average price is up $0.08 at $62.91 per cwt with the range from $56.00 to $63.50 on 820 head reported sold. The National Pork Plant Report posted 193 loads selling with carcass values falling $0.56 per cwt. Lean hog index for 3/5 is at $67.52, down 0.17 with a projected two-day index of $67.66, up 0.15.

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

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