DTN Closing Livestock Comments

Livestock Futures Tumble Lower on Widespread Pressure

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

GENERAL COMMENTS

Cash cattle trade remained sluggish with just a few cattle selling at $175 in the North. The current amount of cattle traded is still not enough to establish a good market trend, but given the defensiveness of the complex, the steady-to-weak market tone may be as good as it gets through the rest of the week. Both sides are expected to become more aggressive over the next couple of days, but active trade may not develop until Friday. The Fed Cattle Exchange Auction on Wednesday listed a total of 365 head all for Kansas, zero actually sold, 365 head were unsold and zero head listed as PO. All cattle listed were set for 1-9 day delivery. According to the closing report, the national hog base is $0.30 lower compared with the Prior Day settlement ($68-$76.99, weighted average $75.88). Corn futures were lower in light activity with July futures 8 cents lower Wednesday. The Dow Jones Index closed 178 points lower with the Nasdaq down 31 points.

LIVE CATTLE

Triple-digit losses were seen through most of the day with prices focusing on active pressure in nearby and deferred contracts ($0.97 to $1.60 lower). With active selling pressure sweeping through the entire complex. Despite the market losses, late-day support helped to pull most contracts well off of session lows with nearby contracts closing nearly $1 per hundredweight (cwt) above daily lows. August futures fell $1.60 per cwt following the sharp pressure in nearly all markets and concern surrounding the proposed additional tariffs on Chinese products. What most traders are scared about, is not the tariffs themselves, but what retaliatory actions China will take. Some are making the case that other regulatory actions that China could take may be more damaging than tariffs themselves. But cattle traders quickly turned away from recent market optimism as prices tumbled lower. Beef cut-outs: mixed, $1.25 lower (select, $197.14) and up $0.12 (choice, $207.44) with moderate demand and heavy offerings (59 loads of choice cuts, 29 loads of select cuts, 19 load of trimmings, 37 loads of coarse grinds).

THURSDAY'S CASH CATTLE CALL:

Steady. Sluggish trade developed in the North with just a few cattle selling at $175 per cwt dressed basis. These prices are steady to weak from levels seen last week, although the numbers sold are not enough to establish a good test for the market. Packers and feedlot managers are expected to become more aggressive as the week continues.

FEEDER CATTLE:

Sharp losses quickly developed across the feeder cattle complex as traders remain concerned about overall trade issues that are likely to develop in the near future ($0.80 to $2.65 lower). Although feeder cattle futures were able to back away from session lows seen at midday, the fact that most nearby contracts posted losses nearing $2.50 per cwt continues to add uncertainty to the entire complex. August through October futures have now moved below $1.50 per cwt once again, which is creating some additional liquidation through the entire market. CME cash feeder index for 7/10 is $145.08 down $1.67.

LEAN HOGS:

Trade activity in the hog market was split between nearby and deferred markets with sharp losses seen in late 2018 and most 2019 contract months ($4.40 lower to $0.27 higher). Front-month July futures posted a narrow gain at closing bell with markets gaining 27 cents per cwt based on the ability for light buyer support to move back into the complex. This pushed prices to $79.77 per cwt at closing bell, but widened the already aggressive premium over other nearby contracts. Deferred futures took advantage of the expanded trading limits with many 2019 contracts trading near $4 per cwt lower. This continues to weaken the overall outlook of the complex long term based on uncertainty of demand from exports due to the potential ramifications of more proposed tariffs placed on China. Pork values slipped lower with as prices posted volatile market moves with butt and picnic values posted sharp triple-digit losses. Even though rib and belly markets posted strong triple-digit gains, the tone of the markets has weakened. Pork cut-out: $83.60 down $0.50. CME cash lean index for 7/9 $81.67 down $0.19. DTN Projected lean index for 7/10 $81.52 down $0.15.

THURSDAY'S CASH HOG CALL:

Steady to $2 lower. Continued pressure in deferred futures trade and long-term concerns surrounding overall pork demand and the ability to maintain export levels is likely to pressure cash markets over the near future. Thursday runs are expected to be seen near 458,000 head. Saturday runs are expected to hit 38,000 head.

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

(BE)

Rick Kment