DTN Livestock Midday: Feeder Cattle Losses Headline Trade

    Cattle feed lot. Photo: K-State Research and Extension - Creative Commons

    Triple-digit losses in feeder cattle futures Friday morning sparked questions of underlying support. Traders are still trying to adjust to potential shifts in the upcoming Cattle on Feed report with cattle placements a major focus. Hog futures are holding light to moderate gains as traders cover positions following Thursday’s aggressive losses.

    GENERAL COMMENTS:

    Cattle futures continue to show increased price pressure with feeder contracts leading the market lower Friday morning. The lack of support in all cattle futures has added to weakness in live cattle trade. February futures are holding a $1 per cwt loss, while other nearby contracts are also trading close to these ranges.

    Limited gains are seen in hog futures as traders focus more on covering positions following Thursday’s abrupt moves lower rather than any significant directional change in prices.

    December corn is up 3 1/4 cents per bushel and December soybean meal is up $1.30 per ton. The Dow Jones Industrial Average is down 38 points with Nasdaq down 175 points.

    LIVE CATTLE:

    Live cattle futures trade has eroded through the Friday session. Following pressure Thursday, trade started generally weak with limited interest seen in all contracts. But the combined pressure in feeder cattle futures and follow-through selling pushed nearby contracts nearly $1 per cwt lower at midday.

    Live cattle futures are well above support levels at this point, but traders remain very cautious going into the Cattle on Feed report Friday afternoon. Because of the significant market reactions following last month’s report, traders seem to be less confident with early analyst projections of on-feed numbers. This could allow for active pressure all session.

    Cash cattle trade remains quiet Friday morning. Deals already done through the week were steady with both last week and other days this week at $124 live and $196 dressed. The focus on the upcoming Cattle on Feed report could limit additional trade before the report is released. But depending on how the report turns out, it is very possible both sides could wait until next week.

    Given the generally light trade over the past few days, packers are expected to want more cattle heading into the weekend, but it wouldn’t be the first time packers end the week short-bought. Friday morning’s boxed beef prices are higher in light trade, with choice cuts $0.98 higher at $281.64 and selects up $0.67 at $263.39 on a total count of 54 loads. Dow Jones estimated Friday’s cattle slaughter at 118,000 — steady with a week ago and 2,000 more than year ago levels.

    FEEDER CATTLE:

    Losses have swept through feeder cattle futures Friday morning. Although earlier losses in live cattle contracts seemed to be tempered in the feeder cattle market Thursday, traders seemed to lose all sense of short-term support Friday morning. October futures remain very lightly traded with light to moderate losses, but the rest of the complex is holding triple-digit losses late morning.

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    Lack of building support in any sector of the cattle market through the week and uncertainty in front of the Cattle on Feed report is encouraging traders to take even more protection. This is likely to keep prices under significant pressure through the end of the session Friday. Analyst expectations for this afternoon’s cattle placements are at 101.4% year ago levels with a range of 98.8% to 103.3%.

    The potential that there could be some significant volatility in these numbers has traders taking protection ahead of the report release. The CME Feeder Index was priced at $155.11 for Oct. 20.

    LEAN HOGS:

    Lean hog prices bounced moderately higher following aggressive triple-digit losses Thursday. The late-week gains in the hog market are consistent, but still are showing no indication of correcting the weak market structure seen over the last few days. End-of-week position adjustments are likely the focus of the most recent gains with nearby contracts limiting price rallies to 40 to 50 cents per cwt through the morning.

    Trade volume is also generally light with most of the livestock complex focused on cattle markets and the afternoon release of the Cattle on Feed report. Trade early next week will focus on the ability to sustain price support in nearby contracts, which could draw additional buyers through the end of October.

    Wholesale pork prices surged higher once again with ham cuts posting a $18.73 per cwt rally. Cutouts are up $4.10 at $102.38 Friday morning on 286.07 loads. Negotiated hog prices are $0.96 lower at $64.23 per cwt on 4,207 head.

    The swine/pork market formula price is listed at $81.77 per cwt. Dow Jones estimated Friday’s hog slaughter at 475,000 — 1,000 more than a week ago and 12,000 less than year ago levels. The CME Lean Hog Index is listed at $83.70 per cwt for Oct. 21.

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