DTN Midday Livestock Comments 10/22 12:01
Feeder Cattle Losses Headline Livestock Trade Friday
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.
By Rick Kment, Contributing Analyst
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 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.
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. 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 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.
Rick Kment can be reached email@example.com
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