DTN Midday Livestock Comments 08/20 12:16
Buyers Move Back Into Livestock Futures
Triple-digit gains quickly developed in livestock futures Tuesday morning,
building on Monday's support. The ability to hold gains through the end of the
session will be the test to determine underlying support.
By Rick Kment
Strong gains have quickly moved into all livestock futures with nearby
cattle and hog futures holding triple-digit gains. Previous market pressure is
starting to slowly crack as consistent buying is moving past the fear of last
week's losses and traders focus more on long-term market potential. Corn
futures are lower in light morning trade with September down 4 1/2 cents. Stock
markets are lower in light trade with the Dow Jones 50 points lower and the
NASDAQ down 11 points.
Strong triple-digit gains have quickly moved into the complex with August
and October futures trading $1.50 per cwt higher at midday. Although traders
have backed away from morning highs through the last hour, the underlying
support in the complex is still developing as traders remain focused on
rebuilding the oversold market structure through the complex. October futures
continue to trade just under the $100 per cwt level. A close below this
threshold would limit follow-through support later in the week. Cash market
interest remains quiet with bids unavailable in all areas at this point. This
is not unexpected for a Tuesday morning, and likely packer interest will not
become active until sometime Wednesday. Asking prices are still trickling into
the market at $109 live basis in the South and $178 in the North dressed basis.
Active trade is likely to be pushed off until the last half of the week. Boxed
beef cut-outs at midday are higher, up $0.45 (select) to up $3.50 (choice) with
moderate to light offerings of 45 total loads reported (16 loads of choice
cuts, 19 loads of select cuts, 5 loads of trimmings, 5 loads of ground beef).
Feeder cattle futures have slowly pulled away from morning highs as buyer
interest seems to be stabilizing. Although strong triple-digit gains continue
to hold across the complex, the concern is that late-day market erosion will
develop, as has been seen in previous days. Fundamentally, little has changed
in the cattle complex or feeder cattle market over the last two days. But sharp
gains in beef cutout values over the last week and lower feed costs are
starting to slowly work through the entire complex. This will not fully offset
pressure last week, but as the market builds momentum, additional commercial
and noncommercial interest is slowly moving back into the complex. This is
expected to solidify market support over the near future.
Active follow-through support has quickly swept through lean hog trade
Tuesday morning with the December contract leading the complex higher. Although
the market remains under significant pressure with uncertainty about trade
relationships and future sales to China and growing pork supplies still looming
over the market, the ability of traders to move prices away from long-term lows
is helping to bring renewed stability to the complex. There is growing
uncertainty about additional price support over the near future given the weak
fundamental outlook for pork that still continues. Cash prices are lower on the
National Direct morning cash hog report. The weighted average price is down
$1.64 at $68.14 per cwt with the range from $58 to $72.50 on 5,620 head
reported sold. Pork values eroded following triple-digit losses in most primal
cuts. Pork cutouts fell $0.87 per cwt at $84.11 per cwt with 235 loads traded.
Lean hog index for 8/16 is $78.55, down $0.47, with a projected two-day index
is $77.99, down $0.56.
Rick Kment can be reached at email@example.com
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