DTN Livestock Open: Bearishness May Be Difficult to Overcome

©Debra L Ferguson Stock Photography

Even though the closure of the JBS Grand Island plant was expected to be temporary, the cattle complex continues to pancake lower as technical support levels are taken out. Hogs are under pressure from cash and cutout weakness.

Cattle: Steady Futures: Mixed Live Equiv: $238.08 -$0.89*
Hogs: Lower Futures: Mixed Lean Equiv: $107.83 -$4.53**
* based on formula estimating live cattle equivalent of gross packer revenue.
(The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

The news of the JBS fire Monday morning resulted in cattle futures gapping lower at the open. However, as the day progressed, futures were able to close the gap with the anticipation and news that the plant will be up and running Tuesday. However, futures could not muster enough support to undo the damage.

Futures have fallen back to the lower level they have been since June 1 and the lowest close since May 4. The decline has been massive and likely unprecedented in such a short period of time. It will be difficult for feedlots to expect a higher cash price this week as packers will use the weakness of futures to their advantage.

Continued weakness of boxed beef is also a negative factor even though packer margins remain very strong. Beef export sales so far this year are a record high at 833,700 metric tons (mt) compared to sales last year at 690,900 mt. China has purchased 129,000 mt compared to 24,000 mt last year. The Commitment of Traders report showed funds as net sellers of 16,053 contracts with current net long positions at 67,593 contracts.

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