DTN Midday Livestock Comments

Limit Gains Develop in Hog Futures

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

Renewed buyer support quickly moved into livestock futures early Monday morning. Traders have posted triple-digit gains in all nearby contracts, with December lean hog futures locked in limit gains. The overall support in the complex continues to add volatility into the market with the potential of follow-through buying activity through the rest of the week. Corn markets are lower in light trade activity. September corn futures are 1 1/2 cents lower. Stock markets are higher in light trade. The Dow Jones is 225 points higher while Nasdaq is up 74 points.

LIVE CATTLE:

Triple-digit gains have quickly moved into the live cattle complex Monday morning despite the sluggish mixed trade seen early in the session. August lie cattle futures are holding a $1 per cwt gain, while other nearby contracts are posting gains near $2 per cwt midday. The strong support above $3 per cwt in feeder cattle futures as well as spill over support from lean hog trade is helping to rekindle the buyer support, which quickly eroded last week. The potential to bring additional volume to the market remains uncertain as trade interest is expected to fade as the week continues to end of the week positioning and the upcoming holiday break. Cash cattle markets are quiet with bids and asking prices undeveloped. It is likely that active bids and asking prices will not be seen until Tuesday or Wednesday, with trade likely to be pushed to the second half of the week. The upcoming holiday weekend will cause both sides to attempt business before late Friday, but given the support in futures trade, feedlot managers are expected to start moderately bullish. Boxed Beef cut-outs at midday are higher, $2.33 higher (select) and up $1.60 per cwt (choice) with light movement of 46 total loads reported (17 loads of choice cuts, 10 loads of select cuts, 10 loads of trimmings, 8 loads of ground beef).

FEEDER CATTLE:

Despite larger than expected feeder cattle placements through the month of July, buyers have shaken off early morning uncertainty and pushed prices sharply higher. September and October contracts have posted gains between $3 and $3.50 per cwt as aggressive underlying support is moving into what traders expect is an oversold market. Concerns of strong placement numbers developed well before the report, as traders tried to adjust prices to the potential that increased placements would be seen. An early-week correction is not out of line, but could add some volatility to the market through the rest of the week. Although traders are focusing on the ability to adjust positions at the end of the month and before the holiday weekend. Trade volume is expected to remain sluggish as the week continues.

LEAN HOGS:

Limit gains have quickly redeveloped at midday in December lean hog futures. The move higher in all livestock trade and underlying support in the lean hog complex following the aggressive run off of contract lows during the last two weeks has sparked underlying buyer activity to move to the market. Nearby contracts are trading $2 to $3 per cwt higher, while firm, but less aggressive gains are seen in the lightly traded deferred contracts. Cash prices are higher on the National Direct morning cash hog report. The weighted average price is $0.24 higher at $37.28 per cwt with the range from $34.00 to $37.65 on 4,668 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price is $0.45 lower at $36.43 per cwt with the range from $34.00 to $36.50 on 1,380 head reported sold. The National Pork Plant Report posted 113 loads selling on the morning report. Pork carcass values gained $3.40 per cwt at $67.57 per cwt. Lean hog index for 8/23 is at $48.93 down 0.57 with a projected two-day index of $47.79, down 1.14.

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

(SK)

Rick Kment