DTN Midday Livestock Comments

October Live Cattle Futures Test Trading Limits

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Russ Quinn)

GENERAL COMMENTS:

Trading activity locked in expanded trading limits in October live cattle futures market is stealing the show Wednesday as traders focus on follow-through buyer support and the potential that the trend of the market may be quickly changing. This has pushed prices sharply higher in all cattle contracts, with the expectation that additional upward movement is possible through the end of the week. Hog futures are generally unsupported as the cattle market movement has stolen the show, leaving hog trade extremely light through morning activity. Corn prices are lower in light trade. December corn futures are 3 cents per bushel lower. Stock markets are lower in light trade. The Dow Jones is 6 points lower while Nasdaq is down 4 points.

LIVE CATTLE:

October live cattle futures are the poster child for a strong market rally that could be developing, as prices are locked in limit-higher trade for each of the last two trading sessions. Although the rest of the complex has been well below the daily trading limit of $4.50 per cwt gains, the gains are just as impressive given the lack of support seen in the market over the last month. Cash cattle markets remain quiet with the recent rally in futures market creating some underlying support in the minds of feeders, although packers are slow to respond. Bids of $118 per cwt are seen in Kansas, although very little overall activity is expected at this point. Asking prices remain hard to find, but expected to be around $127 in the South and $195 and higher in the North. Beef cut-outs at midday are lower, $1.13 lower (select) and down $0.81 per cwt (choice) with active movement of 190 total loads reported (70 loads of choice cuts, 46 loads of select cuts, 19 loads of trimmings, 54 loads of ground beef).

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FEEDER CATTLE:

Sharp gains in nearby live cattle trade have continued to drive buyers back into feeder cattle futures, although very little significant movement has been seen since early trade. Feeder cattle futures have not come even close to the expanded trading limits with upward movement in most contracts contained from $3 to $4 per cwt rallies. But it is important to stress, that a sustained move higher may be more important than the size of the one day move, as renewed buyer confidence could help to establish a significant trend shift through early October.

LEAN HOGS:

Activity in the lean hog futures market has remained extremely light through the morning with mixed prices holding as either side are unwilling to move from early positions. Front-month October futures continue to hold 55 cent per cwt gains based on the firming support in cash and pork values. Other nearby contracts have gained very little interest in buyers, as most buyers who have not already committed to the lean hog market are closely attuned to the swift shift higher in cattle prices through the last couple of days. This could leave lean hog futures mixed in a moderate range through most of the week. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.51 per cwt to $70.18 per cwt with the range from $62.00 to $72.00 per cwt on 4,525 head reported sold. Cash prices are higher on the Iowa Minnesota Direct morning cash hog report. The weighted average price added $0.33 per cwt to $71.54 per cwt with the range from $63.00 to $72.00 per cwt on 1,545 head reported sold. The National Pork Plant Report reported 263 loads selling with prices down $0.66 per cwt. Lean hog index for 10/5 is at $73.75 up 0.37, with a projected two-day index of $74.29, up 0.54.

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

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Rick Kment