DTN Closing Livestock Comments

Limit Losses Plague Hog Futures

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

GENERAL COMMENTS

Cash cattle interest remains at a standstill with bids undeveloped at the end of the day Tuesday. The underlying support seen in deferred live cattle futures and feeder cattle markets is helping to sustain the outlook for some market stability at the end of the week. Asking prices are still poorly defined, but the numbers seen are developing at $116 and higher live basis and $185 dressed. It is expected that cash trade will not develop until later in the week with Friday trade a possibility. According to the closing report, the national hog base is $0.08 lower compared with the Prior Day settlement ($69-$77, weighted average $76.36). Corn futures are lower in light activity with July futures 6 cents lower Tuesday. The Dow Jones Index is 134 points higher with the Nasdaq up 2 points.

LIVE CATTLE

Early pressure in live cattle trade was tempered by buyers moving into the feeder cattle trade. This left mixed market direction through the end of the session ($0.80 lower to $0.50 higher). Nearby contracts closed steady to moderately lower with August futures moving to $105.45 per cwt following a 67-cent-per-cwt loss. The overall lack of support in the complex continues to add even more weakness to the complex with traders focusing on limit losses in the hog complex as a caution not to overlook any market bearishness in the near future. Deferred futures quickly followed the firming direction in the feeder cattle trade. This helped to bring additional stability to the market Tuesday. Beef cut-outs: mixed, $0.23 higher (select, $198.39) and up $0.40 (choice, $207.32) with good demand and heavy offerings (74 loads of choice cuts, 34 loads of select cuts, 20 load of trimmings, 16 loads of coarse grinds).

WEDNESDAY'S CASH CATTLE CALL:

Steady to $2 Higher. Limited interest is expected to be seen midweek outside the weekly Fed Cattle Exchange Auction. This may add some momentum to the market, but the tone of the market is not likely to develop until late in the week.

FEEDER CATTLE:

Firm gains moved into feeder cattle futures midday following sluggish and mixed trade early in the morning. This helped to spark some underlying support which trickled through all cattle markets ($0.27 to $0.62 higher). Traders quickly looked past follow-through pressure in the hog complex, and focused on further weakness that developed in corn trade. This lower feed market price is helping to reduce overall production costs, allowing buyers to become more aggressive during early July. There is likely to be some additional market movement through the rest of the week with growing focus on cash market direction. CME cash feeder index for 7/9 is $146.75 up $0.27.

LEAN HOGS:

Sharp losses developed in all but front-month July futures as traders continue to quickly liquidate positions in the currently eroding market structure (0.72 to $$3.00 lower). August futures posted sharp limit losses, moving to new contract lows below $70 per cwt, closing at $69.77 per cwt. Traders continue to focus on strong pork production and how much demand growth will be realized through the end of the year. This latest round of selling has pushed December contracts under $50 per cwt with prices settling at $49.92 per cwt. Pork prices shifted lower with triple-digit losses in picnic, rib and ham primal cuts. Pork cut-out: $84.10, down $1.29. CME cash lean index for 7/6: $81.67, down $0.19. DTN Projected lean index for 7/9: $81.67, down $0.25.

WEDNESDAY'S CASH HOG CALL:

Steady to $1 lower. Follow-through pressure is expected to be seen in cash markets early Wednesday morning. Most bids are expected to be 50 cents to $1 per cwt lower with increased concerns surrounding weakness in futures prices. Wednesday runs are expected to be seen near 457,000 head. Saturday runs are expected to hit 38,000 head.

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

(BE)

Rick Kment