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DTN Closing Livestock Comment 01/17 15:29

   Feeder Cattle Weaken

   Sharp losses developed in nearby feeder cattle trade, sparking additional 
softness through the entire cattle complex. This could lead to additional 
liquidation through the next couple of weeks. 

By Rick Kment
DTN Analyst

  

   GENERAL COMMENTS: A bearish market tone swept through feeder cattle futures 
trade Thursday, which have been struggling to keep up with the strong moves in 
the live cattle complex all week. January feeder cattle futures posted 
aggressive triple-digit losses, sparking underlying pressure in all cattle 
trade. Hog markets tried to stabilize Thursday, although most contracts eroded 
late in the trading session. Cash cattle activity remains in slow gear with 
just a few bids redeveloping at $197 dressed basis in Nebraska. Asking prices 
are more evident, but getting little to no attention at this point. Cattle are 
prices at $128 and higher live, and $200 to $203 dressed. Trade is expected to 
hold off until Friday at this point. According to the closing report, the 
national hog base is $0.33 lower ($46-$53, weighted average of $51.44). Corn 
futures are higher in light activity. March futures were 6 cents higher. Dow 
Jones Index is 142 points higher with Nasdaq up 44 points.

   LIVE CATTLE: Pressure developed in live cattle trade following sharp 
triple-digit losses in feeder cattle markets. Futures closed $0.40 to $0.82 
lower. The turnaround from sharp gains early in the week was swift and 
aggressive as futures posted moderate-to-strong losses. Fundamentally and 
technically, the live cattle complex remains firm, although traders took this 
opportunity to square positions and post a market correction due to the 
aggressive downward shift in feeder cattle trade. Without renewed support in 
feeder cattle over the next couple of weeks, it is going to be extremely hard 
to build regain buyer support through the live cattle complex, even though beef 
values and cash markets may remain firm. Beef cut-outs: higher, up $0.70 
(select, $207.64) to up $0.57 (choice, $212.50) with good demand and light 
offerings, 129 loads (55 loads of choice cuts, 25 loads of select cuts, 8 load 
of trimmings, 41 loads of coarse grinds).

   FRIDAY'S CASH CATTLE CALL: Steady. It appears that late-week trade will once 
again be in store for traders on Friday. Limited interest earlier in the week 
may leave activity sluggish for the week. Asking prices are expected to 
redevelop at $128 to $130 live and $200 and higher dressed.

   FEEDER CATTLE: Sharp losses flooded into feeder cattle trade, setting the 
tone for weakness through the entire cattle complex (0.72 to $2.35 lower). 
Triple-digit losses developed across the entire complex most of the session 
with front-month January futures leading the complex lower, and holding losses 
near $2.50 per cwt through most of the session. Even though losses eased at the 
end of the trading day, a bearish tone seen in feeder cattle futures as 
spot-month contract moved through support levels is adding to the softness in 
all cattle trade. CME cash feeder index for 1/16 is $143.09, down $1.10. 

   LEAN HOGS: Mixed trade developed in lean hog complex, allowing for firm 
pressure in most contracts. Futures closed mixed, $0.45 lower to $0.80 higher. 
Mixed trade developed Thursday as a combination of follow-through selling 
pressure and short-covering seemed to occupy traders' activities Thursday. 
Following the aggressive market shift lower Wednesday in nearby contracts that 
broke through short-term support levels, limited buyer interest stepped back 
into February futures. Spring and summer contracts continue to show 
follow-through market weakness as traders are trying to account for potential 
demand softness through the summer months. Based on current hog supplies and 
uncertainty when it comes to economic growth and trade agreements, traders are 
becoming very cautious. Pork carcass values firmed on strong gains in picnic 
and ham cuts, while light-to-moderate pressure was seen through other primal 
cuts. Pork cutout values added $0.46 per cwt, moving to $70.10 per cwt on 350 
loads. CME cash lean index for 1/15 is $58.18, up $0.16. DTN Projected lean 
index for 1/16: $58.02 up $0.37. 

   FRIDAY'S CASH HOG CALL: Steady to $1 lower. Sluggish market direction is 
seen at the end of the week with traders focusing on increased underlying 
pressure likely to follow the lack of support in futures trade. Packers will 
continue to try to beat weekend storms, which is likely to keep most bids 
steady Friday morning. Friday plant runs are expected at 462,000 head. Saturday 
runs are scheduled for 150,000 head, but are dependent on weather conditions.

   Rick Kment can be reached at rick.kment@dtn.com 


(AG)

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