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DTN Livestock Midday: Cattle Futures Support Develops

Mike Christensen
By Rick Kment, DTN Analyst May 16, 2014 11:42

Moderate support has redeveloped across both live cattle and feeder cattle futures late Friday morning. Pressure continues to be seen in nearby lean hog futures as traders remain uncertain about future support in pork fundamentals.

        
         

GENERAL COMMENTS:

Cattle futures are benefiting from a midday bounce in live cattle and feeder cattle futures. Traders are starting to make late day adjustments to positions in front of the upcoming cattle on feed report. This could create additional volatility in the cattle market through the rest of the session. Lean hog futures remain under pressure in nearby contracts with little to no additional support developing in pork fundamentals. Corn futures are lower at midday. July corn futures are 2 cents per bushel lower. Stock markets are lower in light trade. The Dow Jones is 9 points lower while Nasdaq is down 11 points.

LIVE CATTLE:

Live cattle futures have quickly moved from an extremely narrow mixed trade to moderate gains at midday. This support is coming from aggressive buyer interest quickly surging into the feeder cattle futures. Trader’s main focus at this point appears to be the upcoming cattle on feed report which is expected to be slightly bullish, or at least if numbers align with pre-report guesses. The firmness in boxed beef values is not likely the result of the market support, as markets moved higher nearly one hour after the morning report was released. Cash cattle trade slowly developed in the South through the morning. Activity may be done for the week, although overall reported numbers sold seem extremely light for the expected needs that have to be covered. But prices are settling in at $145 in the South which would be $1 per cwt lower than last week. Sales in the North were reported $2 to $3 per cwt lower than last week. Asking prices remain at $147 and higher in the South and $236 and higher in the North.

Beef cut-outs at midday are higher, $1.53 per cwt higher (select) and up $1.51 per cwt (choice) with light movement of 73 total loads reported (38 loads of choice cuts, 22 loads of select cuts, four loads of trimmings, 10 loads of ground beef).

FEEDER CATTLE:

Sluggish trade seen through the entire morning was unable to break out of a tight trading range until midday. A new round of buyer support quickly stepped into the complex, helping to push prices firmly higher with gains of 30 to 90 cents per cwt. Most of this renewed activity is expected to be associated with pre-report positioning in front of the cattle on feed report later in the afternoon. But it is still uncertain if there is enough buyer support developing to hold current gains until closing bell, or if prices will fade at the end of the session.

LEAN HOGS:

The inability to improve pork market fundamentals significantly over the last few days has created some late week pressure in nearby lean hog futures. Moderate gains are holding in late year contracts, but most of this sluggish support is focused on narrowing the premium between nearby and deferred contracts rather than any new activity stepping into the market. July and August contracts are most affected by the lackluster buyer support with prices holding 50 to 90 cent losses at midday. Cash prices are lower on the National Direct morning cash hog report. The weighted average price lost $1.08 per cwt to $106.41 per cwt with the range from $104.58 to $110.00 per cwt on 2,910 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 140 loads selling as prices falling $0.45 per cwt. Lean hog index for 5/14 is at $112.73 down 0.18, with a projected two-day index of $112.30 down 0.43.

 
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Mike Christensen
By Rick Kment, DTN Analyst May 16, 2014 11:42

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