DTN Midday Livestock Comments 07/23 11:45
Limit Lower Trade Floods Hog Complex
Aggressive price support on Tuesday created a vacuum in the livestock
markets once buyer interest eased. This caused lean hog futures to tumble
sharply lower with all nearby contracts locked in limit-down trade. Cattle
futures are mostly lower.
By Rick Kment
Early support in the cattle complex quickly eroded, and moderate to sharp
losses were posted in live cattle futures. Lean hog futures are sharply lower
as concerns of softening cash prices and uncertainty about further pork demand
have pushed all nearby contracts limit lower. Corn futures are lower at midday.
September corn futures are 3/4 cent per bushel lower. Stock markets are mixed
in light trade. The Dow Jones is 31 points lower while Nasdaq is up 18 points.
August live cattle futures established new contract highs early in the
trading session Wednesday. Following the initial push higher, prices have
subsequently tumbled lower. Little has changed in the market fundamentally or
technically, but the recent highs have allowed traders to square positions as
uncertainty about further aggressive price support becomes more apparent.
Nearby contracts are holding moderate losses of 50 to 70 cents per cwt, while
deferred futures are holding losses well over $1 per cwt at midday. Cash cattle
markets have seen some initial bids Wednesday morning. Early bids of $156 are
seen in Kansas, while dressed bids of $255 per cwt are developing in Nebraska.
One sale was reported at $255 in the North. The strong rally Tuesday helped
support increased packer interest, but the pullback in futures prices early
Wednesday may cause some to rethink market aggressiveness through the end of
the week. Asking prices are at $160 and higher in the South and $255 and higher
in the North. Beef cut-outs at midday are mixed, $1.54 per cwt higher (select)
and down $0.77 per cwt (choice) with active movement of 126 total loads
reported (65 loads of choice cuts, 40 loads of select cuts, 0 load of
trimmings, 24 loads of ground beef).
Feeder cattle futures are mixed Wednesday. Initial strong follow-through
gains during overnight trade quickly evaporated as additional volume surfaced.
This led to a frenzy of positioning activities through the morning. Nearby
contracts are currently mixed in a wide range as trade volume has slowed
through the complex.
Aggressive price support seen Tuesday was short-lived as continued weakness
in cash markets is creating some major concern about sustaining price levels
through the hog complex. Nearby contracts quickly moved to limit down, falling
$3 per cwt in all contracts through February 2015. The price spread is wide;
nearby contracts are priced from $96 to $124 per cwt. Continued weakness could
create some significant liquidation through the complex, potentially putting
more emphasis on deferred futures priced below $100 per cwt. Cash prices are
lower on the National Direct morning cash hog report. The weighted average
price fell $0.95 per cwt to $125.03 per cwt with the range from $125.00 to
$126.00 per cwt on 3,178 head reported sold. Cash prices are unreported due to
confidentiality on the Iowa Minnesota Direct morning cash hog report. The
National Pork Plant Report is reported 247 loads selling as prices falling
$0.48 per cwt. Lean hog index for 7/18 is at 133.16 down 0.62, with a projected
two-day index of $132.57 down 0.59.
Rick Kment can be reached at email@example.com
Copyright 2014 DTN/The Progressive Farmer. All rights reserved.
DTN offers additional daily information available free through DTN Snapshot – sign up