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DTN Livestock Midday: Sharp Losses Sweep Through Cattle Trade

Ernst Undesser
By Rick Kment DTN Analyst November 20, 2017

DTN Livestock Midday:  Sharp Losses Sweep Through Cattle Trade

Pressure has quickly developed Monday morning in cattle futures following the bearish Cattle on Feed report last Friday. Trade volume is expected to remain sluggish all week in most livestock markets, which may add even more volatility to the complex over the near future.

GENERAL COMMENTS:

Sharp losses in cattle futures were offset by similar gains in nearby lean hog futures late morning Monday. Trade volume remains sluggish in all markets as cattle traders quickly adjust to last week’s Cattle on Feed report and try to account for the increased supply levels in futures trade. Corn prices are higher in light trade.

December corn futures are 1/4 cents per bushel higher. Stock markets are higher in light trade. The Dow Jones is 87 points higher while Nasdaq is up 2 points.

LIVE CATTLE:

Live cattle futures saw triple-digit losses Monday morning as traders focused on increased market activity following the weekend. The shifts in the Cattle on Feed report have sparked most of the bearish market news, but the recent lack of stability continues to draw trade activity back to the complex.

Nearby contracts are holding losses near $2 per cwt, while deferred futures remain stuck from $1.20 and $1.50 per cwt lower in sluggish late-morning trade.

Cash cattle activity remains quiet with very little interest expected from either side early in the week. The holiday weekend ahead will likely keep traders actively focused on getting business done by Wednesday, although at this point, bids and asking prices remain undeveloped.

Beef cut-outs at midday are mixed, $0.67 higher (select) and down $1.68 per cwt (choice), with light movement of 60 total loads reported (25 loads of choice cuts, 10 loads of select cuts, 11 loads of trimmings, 13 loads of ground beef).

FEEDER CATTLE:

Triple-digit losses are evident in all cattle markets Monday morning as feeder cattle futures are trading from $1.50 to $2.30 per cwt lower. The most aggressive selling pressure is seen in spring 2018 contract months with overall trade activity developing through the complex. All but January futures have fallen below $150 per cwt through the morning, which continues to pressure the market through the holiday week.

LEAN HOGS:

Sluggish trade has been seen through most of the morning across hog futures. The mixed trade early in the session has finally worn down the deferred contract pressure and allowed buyers to move into the complex in all but 2019 contract months. This pushed nearby contracts to triple-digit gains with aggressive support building on the ability to draw support in most contracts.

This may spark additional longer-term support through the complex, which may bring additional buyer activity to the market through the week. Even though trade volume is expected to slow as the week progresses, the potential to post additional gains exists as traders also focus on contract-spreading between the cattle and hog complex.

Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.33 at $56.63 per cwt with the range from $55.50 to $57.00 on 3,670 head reported sold.

Cash prices are unreported due to confidentiality on the Iowa/Minnesota Direct morning cash hog report.

The National Pork Plant Report posted 166 loads selling with cutout values gaining $2.08 per cwt. Lean hog index for 11/16 is at $65.42 down $0.55 with a projected two-day index of $64.83, down $0.59.

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Ernst Undesser
By Rick Kment DTN Analyst November 20, 2017