Tuesday Closing Livestock Market Summary

GENERAL COMMENTS

Cash cattle markets are still generally undeveloped with a few token bids starting to be seen in the North through the morning. Dressed bids of $216 are seen in Nebraska and Iowa, but are not expected to be widespread or uniform between all participants. A few asking prices are seen in the South at $142, but even those are hard to get a sense of uniform direction at this point of the week. The volatility in the market may shift cash market activity midweek, and could limit interest for a while. Active trade may be pushed off until Thursday or Friday. According to the closing report, the national hog base is $1.99 higher compared with the Prior Day settlement ($69.00-$77.50) weighted average $75.88. Corn futures moved higher in light activity. July futures were 4 cents higher Monday. The Dow Jones Index is 47 points lower with the NASDAQ down 20 points.

LIVE CATTLE

Early gains quickly turned lower as traders liquidated positions in the closing minutes Tuesday following limit-lower moves in feeder cattle trade ($1.80 to $2.60 lower). Strong gains were seen through most of the morning and going into the last few minutes of trade. Sharp pressure that developed in feeder cattle futures wiped out the few buyers that had stuck out the trading session. This led to a massive late-day liquidation and pushed prices sharply lower. June futures closed $1.90 per cwt lower, at $130.20 per cwt, while August futures fell $2.60 per cwt lower, moving to $123.60 per cwt. Beef cut-outs: higher, $0.13 higher (select, $219.57) to up 2.10 (choice, $250.45) with light demand and heavy offerings (69 loads of choice cuts, 76 loads of select cuts, 27 loads of trimmings, 28 loads of coarse grinds).

WEDNESDAY'S CASH CATTLE CALL:

Steady to 2 higher. The initial movement in futures early in the week and early support in beef values during the week are pointing to feedlot managers being able to demand more money for cattle by the end of the week. But, at this point, packer interest remains extremely light if available at all. Only a few token bids of $216 are seen in the North, which are not going to get a second glance at this point. A few asking prices have surfaced in the South at $142, but there continues to be a lot of room for negotiation before any business gets done at this point. Active trade may be easily delayed until Thursday or Friday.

FEEDER CATTLE

Light buyer support seen most of the day fell apart at closing bell. This allowed markets to close limit lower in most contracts ($3.75 to $4.50 lower). Overall lack of buyer support was evident through the entire feeder cattle market Tuesday even though narrow gains were able to hold the entire morning. But as markets neared closing bell, this pressure became too heavy for the few traders still in the market. August through January 2018 contracts posted limit losses of $4.50 per cwt as traders adjusted to the market pressure and backed away from the aggressive market support seen Monday. This latest move is likely to add even more volatility to the complex as traders remain focused on commercial support, but still uncertain about long-term direction. Feeder cattle trade on the Oklahoma City Livestock Auction posted sharply higher price levels, although the overall market was not well tested. On 9,269 head sold, steers averaged $8 to $12 per cwt higher, while heifers brought $5 to $10 per cwt higher than last week's sale prices. This is likely to spark additional market support later in the week. CME cash feeder index: 6/5: $152.59, up $0.20.

LEAN HOGS

Lean hog futures bounced higher Tuesday, but pulled back from session highs ($0.45 to $0.95 higher). Strong commercial buyer support quickly moved back into the lean hog complex early Tuesday morning following aggressive cash hog buyer support as well as the expectation that traders were focusing on short-covering opportunities. This allowed most contracts to retract most of the early week losses during the morning trade. But the sharp losses seen in the waning hours of cattle market trade put additional pressure on hog markets and pulled prices back from earlier highs, even though the lean hog complex was able to close with respectable gains Tuesday. Firm support continues to hold across the complex, allowing potential follow-through support to move back into the market through the rest of the week. Pork cut-out: $90.25 down $0.93. CME cash lean index for 6/2: $77.90, up $0.56. DTN Projected lean index for 6/5: $78.20, up $0.30. 

WEDNESDAY'S CASH HOG CALL

Steady to $1 higher. Strong upward movement seen through the entire lean hog complex continues to draw buyer support into both futures and cash markets. This is having a positive influence on buying activity through the first full week of June as packer spending continues to increase in order to maintain desired chain speed. With overall plant output slowing significantly at the end of the week, it is not likely to limit the ability of cash spending needed to done by packers. Wednesday runs are expected to once again hit 440,000 head with Saturday levels expected to near 28,000 head.