GENERAL COMMENTS
Cash cattle activity remains undeveloped Tuesday. Packers and feedlot managers are likely off to a slow start for the week given no markets to base initial expectations on due to the markets being closed Monday. Cash trade is likely to be pushed off to the second half of the week and could develop sometime Thursday or Friday. There is growing support for market firmness, although the lack of futures support will make it a hard sell over the coming days. According to the closing report, the national hog base is $0.15 lower compared with the Prior Day settlement ($58-$65) weighted average $64.29. Corn futures were lower in light activity. March futures were 2 cents lower Monday. The Dow Jones Index is 195 points lower with the Nasdaq up 20 points.
LIVE CATTLE
Mixed trade once again developed in live cattle trade. The narrow price ranges through the day pointed to the overall lack of direction in the market early in the week ($0.30 lower to $0.20 higher). With no sense of direction in either the live cattle or feeder cattle futures early Tuesday, the market remained sluggish. Even though traders are trying to account for the higher cash cattle trade that developed late Friday, the focus on moving significant market gains into any live cattle contract seemed to be limited. The overall tone of the market remains firm, but traders are concerned that lack of trade will push markets lower in the near future. Beef cut-outs: sharply higher, $2.97 higher (select, $210.40) and up $3.35 (choice, $215.92) with light-to-moderate demand and offerings (66 loads of choice cuts, 21 loads of select cuts, eight load of trimmings, 18 loads of coarse grinds).
WEDNESDAY'S CASH CATTLE CALL:
Steady. Limited activity is expected to develop over the next couple of days with bids and asking prices likely to become more evident through midweek. It is expected that active trade will be pushed to the second half of the week.
FEEDER CATTLE:
Mixed trade once again developed through feeder cattle futures as traders set nearby contracts against deferred trade ($0.82 lower to $0.22 higher). Limited market activity was seen across the entire cattle market with nearby feeder cattle buying activity slow to develop and even more sluggish to gain momentum. Through most of the trading session, very narrow trading ranges were seen, although deferred markets started to erode in the last minutes of afternoon trade. The limited support in the market is expected to help create some market stability, but buyer interest remains sluggish at best. CME cash feeder index for 2/19 is $148.11, up $0.31.
LEAN HOGS:
Strong triple-digit gains developed in nearby contracts, helping to spark some additional buyer activity across the rest of the complex (0.42 to 1.35 higher). Short-covering activity was the initial spark that pushed prices higher early Tuesday morning. This led to follow-through buying activity as traders tried to push prices off of support levels seen at the end of last week. This may add even more support to the complex, but it will add volatility to the entire market for sure. April contracts moved to $69.20 per cwt after pulling back from session highs, but still holding a $1.05 rally. Firm support developed in carcass values following gains in all primal cuts Tuesday. The overall support helped to bring a sense of stability into the market that had been tested over the last couple of weeks. Pork cut-out: $79.72, up $1.36. CME cash lean index for 2/16 $72.09, down $0.80. DTN Projected lean index for 2/19 $71.41, down $0.68.
WEDNESDAY'S CASH HOG CALL:
Steady to $1 lower. Follow-through pressure is likely to develop in cash hog prices despite strong buyer support seen in futures trade. This could help to draw some additional buying activity later in the week, but for now, most packers continue to offer steady to lower prices. Processing schedules are expected to be 465,000 head Wednesday. Saturday runs are expected at 102,000 head.
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