DTN Closing Livestock Comments

Feeder Cattle Plunge Lower

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

GENERAL COMMENTS

Cash cattle activity remains undeveloped Tuesday afternoon as bids and asking prices remain generally hard to accurately pin down. A few asking prices have surfaced through the North with live prices seen at $116 per hundredweight (cwt). But these asking prices are likely to be just a shot in the dark with initial offers more to get the ball rolling than anything else. It is likely that active trade will not develop until later in the day, with increased interest shown over the next two days. According to the closing report, the national hog base is $3.19 lower compared with the Prior Day settlement ($47-$52.50, weighted average $49.88). Corn futures are lower in light activity with July 1/4 cent lower Tuesday. The Dow Jones Index is 118 points higher with the Nasdaq up 22 points.

LIVE CATTLE

Strong early pressure faded late Tuesday afternoon following limited trade volume with futures closing $0.32 to $1.55 lower. Live cattle trade focused on the sharp losses in feeder cattle markets Tuesday. Even though prices slowly moved back from session lows before closing bell, the underlying weakness in the entire complex continues to be evident. There is additional concern that follow-through pressure will develop as traders try to find support in the feeder cattle market. Technically, the live cattle complex remains in the recent sideways trend, but the pressure in surrounding markets is causing some additional market concerns. Beef cut-outs: mixed, $0.18 higher (select, $198.51) to down $0.19 (choice, $205.49) with moderate demand and offerings (61 loads of choice cuts, 33 loads of select cuts, 18 load of trimmings, 12 loads of coarse grinds).

WEDNESDAY'S CASH CATTLE CALL:

Steady. Limited activity is seen in cash cattle markets, which is likely to hold out until late in the week, similar to activity over the past few weeks. Bids and asking prices are still hard to find, although a few cattle seem to be available at $116 per cwt Tuesday. This will keep markets sluggish through most of the morning Wednesday.

FEEDER CATTLE:

Widespread pressure led to triple-digit losses in most contracts. Futures closed $0.62 to $3.12 lower. Even though nearby feeder cattle futures quickly backed away from earlier losses, the overall tone of the market remains weak with traders pushing nearby contracts $2 to $3 per cwt lower at closing bell. The inability to hold onto recent support levels and prices breaking through July lows sparked widespread liquidation in all contracts. It is uncertain just how much, if any, support will develop midweek with nearby contracts slipping below the $150-per-cwt price level. CME cash feeder index for 8/6 is $150.06, up $0.31.

LEAN HOGS:

Lean hog market activity was heavily influenced by sharp losses in the cattle trade. Prices were mixed with very limited direction, closing $0.80 lower to $0.17 higher. Moderate pressure redeveloped Tuesday with front-month August futures leading the complex lower. This may add some additional uncertainty to the complex as traders look for longer-term market interest to bring stability. Trade volume remains extremely sluggish Tuesday with traders focusing on the inability to spark longer-term market activity. Pork values weakened following sharp losses in pork belly primals. Pork cut-out: $72.05, down $0.76. CME cash lean index for 8/3: $66.04, down $1.53. DTN Projected lean index for 8/6: $64.64, down $1.40.

WEDNESDAY'S CASH HOG CALL:

Steady to $2 lower. Continued pressure is seen in cash hog markets with packers in no hurry to increase bids any time soon. The fact that packers are maintaining needed and desired chain speeds at lower prices points to further losses in the near future. Wednesday runs are expected at 462,000 head with 124,000 head expected Saturday.

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

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Rick Kment