DTN Midday Livestock Comments

Active Buying Moves Into Cattle Futures

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Russ Quinn)
GENERAL COMMENTS:

Strong market support is seen across all cattle trade with nearby contracts holding $2 per cwt gains in live cattle futures and spot feeder cattle futures trading over $3 per cwt higher. The overall support in the complex is becoming well-rooted, with prices moving to summer highs. Corn prices are higher in light trade Tuesday. July corn futures are 3/4 cent higher. Stock markets are higher in light trade. The Dow Jones is 81 points higher while Nasdaq is up 2 points.

LIVE CATTLE:

Live cattle futures have aggressively moved back into the complex with August futures surging $2.20 per cwt higher and moving prices to $108.62 per cwt at midday. This has moved through short term resistance levels, with prices in the August contract trading at the highest levels since March. There is growing support that overall supply levels may continue to be tight through the fall and winter months, given the current and expected demand for beef projected by many market watchers. Cash cattle bids have started to develop through the morning, but bids are still well below asking prices. Given the support in futures trade, it is unlikely that feedlot managers will pull the trigger quickly without some movement from packers. Bids are seen at $107 to $108 live and $172 to $173 dressed. This is well below asking prices that are holding at $114 and higher live and $180 to $183 dressed. It may easily be Friday before active sales are reported. The Fed Cattle Exchange Auction today listed a total of 428 head all for Kansas, with 142 actually sold at $112.00, 109 head were marked as unsold, and 177 head marked as PO (Passed Offer of $111.00) All cattle listed were set for a 1-9 day delivery. Boxed Beef cut-outs at midday are higher, $0.28 Higher (select) and up $0.26 per cwt (choice) with light movement of 89 total loads reported (57 loads of choice cuts, 15 loads of select cuts, 4 loads of trimmings, 14 loads of ground beef).

FEEDER CATTLE:

Sharp triple-digit gains have flooded into feeder cattle trade. This is moving additional buyer support back into the complex, with traders looking for the ability to add increased market support to the entire complex. August futures are leading the complex higher with a $3.17 per cwt rally. The ability to move live cattle futures above $108 per cwt in front-month futures is helping to solidify buyer interest which just a week ago seemed to be uncertain about stepping back into the complex.

LEAN HOGS:

Limited pressure is seen in lean hog futures trade Wednesday. But the overall weaker tone in the market continues to hold with nearby contracts setting new contract lows and giving every indication that buyer support may be hard to find in the near future. August futures have eroded 30 cents per cwt, moving to $67.90 per cwt as traders focus on current supply levels and the uncertainty of demand growth for both short- and long-term market activity. Cash prices are lower on the National Direct morning cash hog report. The weighted average price is down $1.39 at $70.59 per cwt with the range from $70.00 to $73.00 on 5,376 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price is down $1.09 at $70.97 per cwt with the range from $70.00 to $73.00 on 2,639 head reported sold. The National Pork Plant Report posted 226 loads selling with carcass values falling $1.74 per cwt. Lean hog index for 7/16 is at $79.69 down 0.65 with a projected two-day index of $79.15, down 0.54.

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

(SK)

Rick Kment