DTN Midday Livestock Comments 08/21 12:01
Cattle Support Holding Midday
Moderate gains have held in cattle futures early Wednesday morning despite
initial support slowly eroding and pressure developing in hog trade.
By Rick Kment
Strong midday losses are developing in lean hog futures as traders slowly
back away from previous gains. The early morning support in cattle futures is
holding prices higher, but prices have backed away from morning highs based on
limited buyer activity moving back into the complex. Corn futures are steady to
higher in light morning trade. September corn futures are 1 cent higher. Stock
markets are higher in light trade. Dow Jones is 269 points higher with NASDAQ
up 74 points.
Additional buying activity is moving back into the complex with nearby
contracts holding moderate gains of 30 to 70 cents per cwt as traders remain
focused on underlying support through the entire complex. Although prices have
slowly worked back from initial price support, seen early Wednesday, the
underlying firmness in the complex continues. This is creating additional
optimism that recent gains may hold through the end of the week. October
futures are currently trading at $100.17 per cwt, with the target point of $100
per cwt the main focus of many traders. If spot-month October futures break
below the $100 per cwt threshold at or before closing bell, this could spark
additional market weakness later in the week. Cash market activity still
remains at a standstill with packer bids still unavailable. Although it is
expected that packer interest will start to show some life through the end of
the day, the expected wide gap between any asking prices and potential bids is
likely to limit either side from finding common ground until later in the week.
Cash trade is likely to be pushed off until sometime Thursday or Friday, and
quite possibly after the release of the cattle on feed report Friday afternoon.
Boxed Beef cut-outs at midday are higher, $1.56 higher (select) and up $0.46
(choice) with moderate light of 65 total loads reported (44 loads of choice
cuts, 9 loads of select cuts, 4 loads of trimmings, 8 loads of ground beef).
Active support moved back into feeder cattle trade with September futures
holding a $1.02 per cwt gain at midday. Although prices have slowly eroded from
morning highs, the underlying short-term support is helping to create a
combination of technical and fundamental support midweek. Limited attention is
being given to early estimated for the upcoming cattle on feed report, but with
analyst's estimates expected even with last year's placement levels in July,
traders are expecting any major surprises in the late-week report.
Lean hog futures have turned lower following the inability to sustain
early-market gains as increased volume moved into the complex. The continued
pressure in cash hog prices is not a surprise to the market, although the
inability to find any sense of strong fundamental support on which to build a
market base is once again causing nearby futures to erode. October futures are
holding $1.15 per cwt losses, trading at $63.82 per cwt while other nearby
contracts are holding 40 to 75 cent losses at midday despite limited volume.
The concern that follow-through pressure may once again test long-term lows has
many traders nervous and unwilling to actively step back into the complex. Cash
prices are lower on the National Direct morning cash hog report. The weighted
average price is down $2.18 at $66.89 per cwt with the range from $58 to $71.50
on 4,322 head reported sold. Pork values posted limited gains based on
triple-digit price increases in ham and belly cuts. Pork cutouts added $0.72
per cwt at $84.63 per cwt with 165 loads traded. Lean hog index for 8/17 is
$77.99, down 0.56, with a projected two-day index is $77.40, down 0.59.
Rick Kment can be reached at email@example.com
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