DTN Closing Livestock Comment 08/16 16:43
Late-Week Pressure Develops in Hog Futures
October lean hog futures took its turn at posting limit losses Friday as
early support quickly evaporated following technical pressure, which triggered
By Rick Kment
For the week ended 8/16/19: From Friday to Friday livestock futures scored
the following changes: Aug LC off $8.13, Oct LC off $8.70; Aug FC off $4.33,
Sep FC off $6.07; Oct LH off $4.97, Dec LH off $3.90.
Late-day activity turned bearish in all livestock futures with limit losses
in spot lean hog contracts setting the tone. The inability of cattle futures to
hang onto early support adds to underlying concerns that traders may expect
additional weakness through the next few days. Corn futures rallied higher
following the final news story from the DTN\Progressive Farmer Digital Yield
Tour and concerns that additional production problems will be reported over the
next week. September corn futures are 10 1/4 cents higher. Stock markets are
higher in light trade. Dow Jones is 308 points higher with NASDAQ up 129
points. Cash cattle trade appears essentially done for the week with limited
sales of live cattle in Nebraska at $106 per cwt. This is generally $7 per cwt
lower than last week's levels, and continues to confirm the weaker market
trend. Most cattle still on showlists will likely be relisted next week as both
sides do not appear to be in any hurry to trade. National Daily Direct
afternoon hog report is $0.49 lower with a weighted average of $69.65 per cwt.
Full range of $59 to $74 per cwt on 9,786 head sold.
LIVE CATTLE: Continued weakness puts additional pressure on cattle futures
($0.27 lower to $0.82 lower). Moderate losses continue to develop in all live
cattle trade late Friday. Despite firm market support moving into the complex
the first half of the session, underlying weakness pushed prices lower at
closing bell. August and October futures are both trading below $100 per cwt
with traders searching for longer-term support, but so far unable to find any.
This may add increased weakness early Monday as traders focus on technical
pressure, which continues to develop. Beef cut-outs: higher, $2.59 higher
(select, $213.26) and up $2.57 (choice, $238.69) with good demand and light
offerings, 100 loads (55 loads of choice cuts, 16 loads of select cuts, 10
loads of trimmings, 19 loads of coarse grinds).
MONDAY'S CASH CATTLE CALL: Lower. Cash cattle activity Monday is expected to
remain undeveloped with showlist distribution and inventory taking the focus.
The bearish tone in futures trade will continue to soften the market, although
packer resolve may start to improve given higher beef values and cattle
distribution to other plants becoming more routine following last week's fire
in Garden City, Kansas.
FEEDER CATTLE: Active late-week pressure sparked additional weakness ($0.65
lower to $1.20 lower). Triple-digit losses backed away from midweek gains with
August contracts holding a $1.20 per cwt loss. The bearish tone across the
entire livestock market continues as concerns grow about beef demand over the
coming months and potential moves in grain trade. Given the sharp losses in
corn following Monday's USDA estimated production numbers, buying is starting
to move back into the complex based on expectations that lower production will
be reported over the next few days or weeks. CME cash feeder index for 8/15 is
$137.60, down 1.55.
LEAN HOGS: Sharp late-day losses added increased bearishness to the entire
complex ($0.42 to $3 lower). A combination of technical and fundamental
pressure unfolded late Friday, breaking away from early support and moving spot
lean hog futures to limit losses of $3 per cwt. Not only does this create
potential widespread liquidation, sparking additional technical shifts lower,
but the limit losses will expand trading limits Monday to $4.50 per cwt. The
volatility in potential demand for pork in domestic and export markets is being
paired with the bearish moves in cattle futures during the week. Pork cutout
values posted sharp losses. Pork cutout values fell $1.97 per cwt, moving to
$86.26 per cwt on 352 loads. CME cash lean index for 8/14 is $79.34, down 0.52.
DTN Projected lean index for 8/15 is $79.02, down 0.32.
MONDAY'S CASH HOG CALL: Steady to $2 lower. Sharp futures losses Friday are
expected to put cash trade on the defense once again. This may allow for firm
pressure with most bids expected to be $1 to $1.50 per cwt lower. Monday
slaughter numbers are expected at 474,000 head.
Rick Kment can be reached at Rick.Kment@dtn.com
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