DTN Closing Livestock Comments

GENERAL COMMENTS

A few thousand live cattle sold Tuesday afternoon in parts of Nebraska and Kansas at $117, roughly $5 lower than last week's 5-area steer average. Yet trade volume was insufficient to establish a true market test. According to the closing report, the national hog base is $1.52 higher ($56.00-$65.50, weighted average $64.37). The corn market got hot late in the session and closed a good nickel higher. Commercial buying seemed to be the primary sponsor of Tuesday's rally. The stock market closed lower with traders responding negatively to higher interest rates. The Dow settled as much as 193 points lower with the Nasdaq off by 59.

LIVE CATTLE

Despite persistently large discounts to the feedlot trade, live futures still can't find the brakes as prices just keep rolling down the hill. Live contracts closed sharply lower for the second consecutive session this week, settling 87 to 165 points lower. Closing below the up channel in place since early April, the June chart looks tough as of Tuesday's close. Beef cut-outs: mixed, up $0.39 (select: $209.51) to off $0.48 (choice: $231.64) with light-to-moderate demand and moderate-to-heavy offerings (70 loads of choice cuts, 54 loads of select cuts, 3 loads of trimmings, 19 loads of ground beef).

WEDNESDAY'S CASH CATTLE CALL:

Significantly lower than last week. Regardless whether significant trade volume develops Wednesday, Thursday or Friday, price levels will certainly be lower than last week. The only question still open may be: "How much lower?"

FEEDER CATTLE:

Feeder futures were hammered by another round of triple-digit losses (i.e., off 160 to 202). While the big jump in corn prices certainly didn't help intrinsic value, it's doubtful that it made much difference given the nonstop implosion in deferred live prices. August closed at its lowest level since April 3. 05/14: $135.92, off $0.20.

LEAN HOGS:

While summer lean contracts demonstrated great confidence on the high wire Monday, somebody must have looked down Tuesday and didn't see a net. Lean prices quickly retracted most of Tuesday's rally, closing 70 to 142 lower. June and August closed back below their 40-day moving averages, but July managed to hold above this specific technical marker. While the gap between futures and cash and clearly closing, many specs and commercials remain confused about the appropriateness of board premiums. Carcass value closed moderately higher, supported by better demand for fresh cuts, processing items and ribs. Pork cut-out: $74.24, up $0.69. CME cash lean index for 05/11: $64.65, up $0.59 (DTN Projected lean index for 05/14: $65.23, up $0.58).

WEDNESDAY'S CASH HOG CALL:

$1-$2 higher. The midweek cash market should be well supported thanks to tightening country supplies and firming wholesale pork prices.

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

(AG)

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