GENERAL
COMMENTS: Buying in lean hog trade led the complex higher, allowing for
trade near limit gains through part of the morning. Even though prices
backed away from session highs, the strong bounce at the end of the week
limited market losses. Cattle futures trickled higher Friday with the
focus on position adjustments before the weekend. From Friday to Friday
livestock futures scored the following changes: Feb LC, up $1.55; Apr
LC, up $1.00; Jan FC, off $4.67; Mar FC, off $2.08; Feb LH, off $1.43;
Apr LH, off $1.08. Cash cattle trade remains undeveloped at this point,
with activity likely to hold out until late afternoon. Asking prices
remain firm at $127 to $130 per cwt live and $200 and higher dressed.
The need for cattle by packers should help to spark some additional
packer interest late in the week, but current bids are showing little
aggressiveness at this point. Live bids are seen at $122 to $123 per
cwt, while dressed bids are at $195 to $197 per cwt. According to the
closing report, the national hog base is $0.41 higher ($46-$53, weighted
average of $51.81). Corn futures are higher in light activity. March
futures were 1 3/4 cent higher. Dow Jones Index is 300 points higher
with Nasdaq up 62 points.
LIVE CATTLE: Pressure developed in live cattle
trade following sharp triple-digit losses in feeder cattle markets.
Futures closed mixed, $0.57 lower to $0.62 higher. Buyers moved into
live cattle trade Friday with all but front-month February futures
posting firm gains. The turn lower in cattle markets last week has
sparked some additional underlying support and end-of-the week
position-taking. Even though trade remains extremely light in the last
half of the week, the focus on still-strong beef demand through spring
is helping to keep prices near the top end of the trading range. Beef
cut-outs: higher, up $1.81 (select, $209.45) to up $0.65 (choice,
$213.15) with light demand and light-to-good offerings on 96 loads (38
loads of choice cuts, 13 loads of select cuts, 17 load of trimmings, 29
loads of coarse grinds).
MONDAY'S CASH CATTLE CALL: Steady. Activity
Monday is expected to remain extremely sluggish given that futures trade
will remain closed and packers and feedlot managers will go through the
weekly chore of showlist distribution and inventory-taking. Limited
cash market activity won't develop until midweek or later.
FEEDER CATTLE: Mixed trade developed late in the
week as traders tried to add stability back into the complex. Futures
closed $0.10 lower to $0.30 higher. Trade volume was limited Friday,
although firm buyer support developed in most contracts through the
first half of the session. Sharp triple-digit losses Thursday sparked
increased short-covering as traders tried to prepare for the longer
holiday weekend. Futures trade will remain closed Monday, and will open
at normal trading times Tuesday morning. That will allow traders and
analysts time to focus on potential longer-term moves in the cattle
industry in general and overall feeder cattle specifically. CME cash
feeder index for 1/17 is $142.05, down $1.04.
LEAN HOGS: Strong gains quickly developed
Friday, pushing futures $0.30 to $1.65 higher. Aggressive buyer support
moved into the lightly traded lean hog futures Friday morning with
triple-digit gains seen in all nearby contracts. The unrestricted buyer
support pushed April through June contracts over $2 per cwt higher
through most of the session, with the April contract nearing limit
gains. The inability to hold prices at session highs is not expected to
add additional pressure to futures, as traders tried to adjust positions
following sharp previous losses. Even though there is no significant
news to explain the rally in futures, the announcement that China will
include poultry as one of the products it will buy and reports coming
out of China that pork supplies are tightening are generally positive
for the overall pork industry in the long term. Pork carcass values
trickled lower with widely mixed prices in primal cuts. Loin markets
surged $2.39 per cwt higher, while picnic cuts were down $2.34 per cwt.
Pork cutout values fell $0.13 per cwt, moving to $69.97 per cwt on 232
loads. CME cash lean index for 1/16 is $58.18, up $0.16. DTN Projected
lean index for 1/17: $58.16, down $0.02.
MONDAY'S CASH HOG CALL: Steady to $1 higher.
Activity Monday is expected to remain sluggish with bids expected to be
mostly steady. With futures trade closed Monday due to the holiday, cash
market direction is likely to be limited. Hog slaughter levels are also
expected to be reduced early in the week with 400,000 head expected
Monday, while all packers are expected to move back to a normal schedule
on Tuesday.
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