DTN Closing Livestock Comments

Livestock Gains Erode Late Friday

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

GENERAL COMMENTS: Strong early gains across livestock trade were short-lived as initial support failed to hold in limited volume, allowing end-of-the-week positioning to develop late Friday. The feeder cattle market was the most volatile with nearby futures posting triple-digit losses while the deferred January 2020 contract sustained a triple-digit gain. From Friday to Friday, livestock futures scored the following changes: Apr LC up $0.88; Jun LC up $0.95; Mar FC off $1.68; Apr FC off $0.25; Apr LH up $0.95; May LH up $0.45. Cash cattle trade was developing Friday with light-to-moderate dressed cattle trade taking place in Nebraska and Iowa late morning at $205 per cwt. This is generally $3 per cwt higher than last week. Afternoon trade started to develop in the live market in all areas with prices at $128 per cwt, $2 per cwt higher. Though additional activity is likely to develop through the afternoon, the trend of the market likely has been set. The National Daily Direct afternoon hog report was $0.33 higher ($42-$45.29, weighted average $45.01) on 3,515 head sold. Corn futures were higher in light activity with May up 2 cents per bushel. The Dow Jones Index was 105 points higher with the Nasdaq up 59 points.

LIVE CATTLE: Limited activity kept live cattle prices mixed ($0.30 lower to $0.37 higher) Friday afternoon despite strong initial gains. The April contract led the complex higher Friday morning, breaching its 2018 high of $130.10 per cwt. However, limited trade volume the rest of the session allowed the contract to erode, and it was unable to close above $130 per cwt. Traders continue to allow prices to hover near long-term highs, but the inability to secure additional buyer interest at these levels is eroding market support. The current support in cash trade and beef values suggests that additional runs will be seen next week. But unless traders are able to breach these levels in the near future, additional market liquidation is expected. Beef cut-outs: higher, up $1.52 (select, $216.79) to up $1.34 (choice, $221.29) with fairly good demand and light-to-moderate offerings, 75 loads (34 loads of choice cuts, 15 loads of select cuts, 8 load of trimmings, 19 loads of coarse grinds).

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MONDAY'S CASH CATTLE CALL: Steady. Following cash market direction developing Friday, early week interest is expected to remain sluggish with inventory-taking and showlist distribution the main focus Monday.

FEEDER CATTLE: Wide shifts in feeder cattle trade sparked increased market uncertainty Friday. Futures settled $1.65 lower to $1.30 higher. Movements in feeder cattle trade Friday caused general confusion, as spring and summer contracts quickly retreated following a $1.65-per-cwt loss in the spot March contract. The inability of live cattle to hold early gains caused late-day protection-taking in the event that this lack of support is signal of an aggressive turn in live cattle futures. Late-day gains in corn futures also caused concern in nearby trade, as this swift shift through the session may indicate further market shifts during March. Deferred feeder cattle futures were firm to sharply higher due to light volume and expected long-term support holding across the complex. CME cash feeder index for 2/28 is $139.23, down $0.71.

LEAN HOGS: Initial buyer support eroded Friday as traders returned to concerns about pork demand growth. Futures closed $0.37 lower to $0.52 higher. Strong support swept through lean hog trade Friday morning, pushing futures triple digits higher as traders focused on early month momentum and the potential for additional players moving back into the market through early March. But as the session continued, limited follow-through buyer interest developed, allowing deferred traders to search for underlying short-term support. Limited late-day buying held in April and May contracts, although the tone of the market remains focused on potential gains through the next couple of weeks. Despite known concerns of strong hog and pork supplies, there is still hope that potential China trade will spark renewed buying interest. Pork cutouts saw additional support, ending higher for the second consecutive day. Pork cutout values were up $1.43 per cwt to $61.92 per cwt on 216 loads. CME cash lean index for 2/27 is $52.64, down $0.18. DTN Projected lean index for 2/28 $52.13, down $0.51.

MONDAY'S CASH HOG CALL: Steady to $1 lower. Limited direction is expected Monday, although packers will continue to move into the market, gaining access to market-ready hogs. Limited weather disruptions are expected over the next few days, potentially allowing packers and shippers to stay on track. Monday slaughter is expected at 477,000 head.

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

(AG)

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Rick Kment