DTN Closing Livestock Comments

Lean Hog Futures Slam Sharply Higher for the Second Consecutive Session

John Harrington
By  John Harrington , DTN Livestock Analyst
(DTN file photo)

GENERAL COMMENTS

A fairly active cattle market developed in the Northern tier Friday with dressed deals marked at mostly $173, roughly $2.50 lower. Live trading in the North was mostly marked at $109 to $110, generally $1 to $2 lower basis in Nebraska. On the other hand, cash business in the South remains rather slow as of this writing. Some live steers and heifers have sold at $110, $1 lower than last week. The National hog base closed off $0.86 compared with the Prior Day settlement ($39 to $42, weighted average $42.33). From Friday to Friday livestock futures scored the following changes: Aug LC up $1.17; Oct LC up $1.62; Aug FC up $1.05; Sep FC up $2.30; Oct LH up $7.43; Dec LH up $7.80. Corn futures closed a penny lower in late-week profit-taking. Having said that, the corn market generally enjoyed a week of recovery following the bearish reaction to the August 1 crop report. The stock market closed higher with the Dow up 110 points and the Nasdaq better by 9.

LIVE CATTLE

Futures closed moderately to sharply higher, up 47 to 160. Live contracts traded without much character through most of the session, but then aggressive short-covering and spec-buying lifted the first four contracts to triple-digit gains. Futures have recovered nicely from early week lows. Indeed, spot August will once again be knocking on the door of 110 when trade resumes on Monday. Bulls have been fitfully working all summer to build support above this level, and it looks like they are ready to give it at least one more try. Negatively, cash and futures have pretty much converged, and that may mean a new surge of cash strength will be necessary for new board highs to develop. Beef cutouts: higher on choice and weak on select (choice, $211.38 up $2.28, select $200.92 off $0.54) on moderate-to-fairly good demand and light offerings (40 loads of choice cuts, 20 loads of select cuts, 10 loads of trimmings, 18 loads of coarse grinds).

MONDAY'S CASH CATTLE CALL:

Steady. Feedlot activity on Monday will be typically limited to the distribution of new showlists. We expect ready numbers to be mixed, smaller in the North, and larger in the South.

FEEDER CATTLE:

Futures closed moderately to sharply higher, up 67 to 162. Feeder futures generally followed the bullish lead of their live counterparts. September through January settled with triple-digit gains. Note that most of these contracts closed above 40-day moving averages. It is also worthwhile to point out that the first half of the board has moved above the cash index. CME cash feeder index: 08/16: $149.59, off $0.70.

LEAN HOGS:

Futures closed sharply higher, up 80 to 312. We thought that the limit gains seen on Thursday in hog futures made the market a tough act to follow. Boy were we wrong. Contracts enjoyed another bullish surge based upon more specific reports concerning the plans of Chinese and U.S. negotiators. It sounds like they are mapping out a series of talks to end trading problems ahead of a November summit involving President Trump and Chinese leader Xi Jinping. In addition, such speculation triggered another wave of short-covering and technical-buying. Pork cutout: $66.77 (FOB Plant) off $0.86. CME cash lean 08/15: $54.21, off $1.02 (DTN Projected lean index for 08/16: $52.94, off $1.27.

MONDAY'S CASH HOG CALL:

$1 to $2 lower. Look for hog buyers to remain on the defensive when the country market resumes on Monday.

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

(BE)

John Harrington