DTN Livestock Midday: Limit Gains Sweep Into Feeder Cattle

Photo: Dr. Jenny Jennings, Texas A&M AgriLife

August feeder cattle are locked in limit higher trade following the emotionally driven liquidation over the previous two days. Nearby live cattle futures struggle to find support, despite strong gains in deferred contracts.

General Comments

Triple-digit gains can be seen in all livestock markets as feeder cattle futures have surged to limit gains of $6.75 per cwt based on buyers flooding into the oversold market. Nearby live cattle trade remains under limited pressure, despite triple-digit gains in deferred contracts.

Corn futures continue to erode despite limited additional market news and sluggish trade. September corn futures are 4 cents lower. Stock markets are lower in light trade. Dow Jones is 670 points lower with NASDAQ down 236 points.

LIVE CATTLE:

Mixed trade is seen in live cattle trade with narrow losses in August and October futures, while the rest of the complex is holding onto strong gains. The ability for strong triple-digit gains to redevelop through the end of the week will go a long way in redeveloping market stability through all cattle trade. April through August contracts are holding the most aggressive gains, trading $2 to $2.50 per cwt higher.

Cash cattle activity interest still remains limited Wednesday morning as packers and feedlot managers unwilling actively step into the market given the volatility over the last couple of days. It is likely that packer interest may start to improve with a few token bids late in the day Wednesday, although active trade may not develop until Thursday or Friday.

Boxed Beef cut-outs at midday are higher, $4.51 higher (select) and up $5.05 (choice) with moderate movement of 83 total loads reported (31 loads of choice cuts, 14 loads of select cuts, 21 loads of trimmings, 16 loads of ground beef).

FEEDER CATTLE:

Front-month August feeder cattle futures are locked in limit gains of $6.75 per cwt following active buying support flooding into the complex Wednesday morning. Other nearby contracts have pulled back from morning highs, but are still trading $5 to $6 per cwt higher at midday.

The lack of follow through selling in the entire cattle complex following the fear driven liquidation early in the week is opening the door for additional sharp gains as traders become focused on the ability for the packing industry to absorb production losses from the shutdown Kansas plant.

LEAN HOGS:

Active gains have quickly developed in lean hog futures with October through August 2020 contracts holding triple digit gains through the morning. Although nearby futures have slowly pulled back from session highs, the ability to hold prices above $1.50 per cwt will likely spark additional late week buyer support through the complex.

There still remains uncertainty about longer term buyer support with trade issues with China and overall lack of pork moving into export channels likely to keep optimism limited. Firm domestic demand continues to create underlying support in nearby contracts, limiting further downward pressure.

Cash prices lower on the National Direct morning cash hog report. The weighted average price is down $2.11 at $67.92 per cwt with the range from $61 to $72.50 on 4,106 head reported sold.

Pork values slipped lower based on wide market swings Wednesday morning. Pork cutouts fell $0.23 per cwt at $88.98 per cwt with 149 loads traded. Lean hog index for 8/12 is $80.95, down 0.80, with a projected two-day index is $79.86, down 1.09.

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