DTN Midday Livestock Comments

GENERAL COMMENTS:

Firm buyer support seen early Tuesday morning slowly eroded as buyer support slowly fell off the bandwagon during the morning session. The lack of additional market information and trade interest developing in the complex is keeping April through December live cattle futures in a narrow trading range. Mixed trade is holding across the lean hog futures trade as traders continue to focus on the firm support in market fundamentals and avoid the drama of market volatility in outside markets. Corn prices are lower. March corn futures are 2 cents lower. Stock markets are lower in active trade. The Dow Jones is 89 points lower while Nasdaq is down 29 points.

LIVE CATTLE:

February live cattle futures have traded firmly lower through the entire session Tuesday, holding $1.40 per cwt losses at midday, although trade volume remains extremely light. The rest of the complex remains steady to moderately higher, although the inability to hold onto early market support is creating some underlying market concerns about the ability to sustain buyer support in the complex. At this point, traders are expecting markets to remain in a narrow range with the exception of spot February contracts which are trying to align with April contract prices now that first-notice day has arrived in February contracts. Cash cattle markets are still untraded, although some bids are starting to develop in the South through the morning Tuesday. Bids are seen at $132 across both Kansas and Texas, which will start the ball rolling and potentially create additional movement as the week continues. Asking prices are expected to be around $138 in the South and $215 in the North, although cash activity is likely to be delayed until midweek or later. Beef cut-outs at midday are lower, $1.51 lower (select) and down $0.05 per cwt (choice) with light movement of 77 total loads reported (39 loads of choice cuts, 21 loads of select cuts, 8 loads of trimmings, 9 loads of ground beef).

FEEDER CATTLE:

Even though nearby feeder cattle futures continue to hold onto light to moderate gains, the inability to maintain the support seen early in the session is creating some underlying concern in the complex. Deferred futures have moved lower at midday, creating additional pressure across the complex, as traders are focusing on the ability to draw additional interest back into the market, and the potential that prices see even more price swings in the last hour of trade.

LEAN HOGS:

Market activity has been stuck in a narrow trading range through the morning with prices mixed as nearby gains have been offset by light pressure in deferred contracts. The lack of overall movement has kept the lean hog futures market in a choppy but firming pattern over the last couple of months as very little market volatility has developed through the complex over the last couple of weeks. The focus on firming market fundamentals is helping to draw additional buyer support back into the complex, but the ability to keep markets consistent despite the wild moves of surrounding markets seems to be the most impressive attribute of the hog complex of early 2016. Cash prices are higher on the National Direct morning cash hog report. The weighted average price gained $0.25 per cwt to $61.58 per cwt with the range from $59.90 to $63.50 per cwt on 4,607 head reported sold. Cash prices are unreported due to confidentiality on the Iowa Minnesota Direct morning cash hog report. The National Pork Plant Report reported 281 loads selling with prices up $1.15 per cwt. Lean hog index for 2/5 is at $64.62 up $0.32, with a projected two-day index of $64.89, up $0.27.

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

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