GENERAL
COMMENTS: Lean hog and feeder cattle futures saw sharp losses Tuesday
morning as traders found little to no support from meat values in the
morning reports. Additional strength in grains points to higher
production costs, adding even more bearishness to livestock markets.
Cash cattle markets remained quiet Tuesday with little to no additional
direction seen from either side. Bids and asking prices remain hard to
pin down, which could delay overall trade until later in the week. The
recent shift toward Wednesday trade in the South has some looking for
both sides to become more aggressive Wednesday morning. Recent weakness
in futures trade is likely to limit cash market support in the near
future, although feedlot managers are not likely to fold easily this
early in the week. The National Daily Direct afternoon hog report was
$0.11 lower ($72-$83, weighted average $80.91) on 15,361 head sold. Corn
futures posted moderate gains in light trade with July up 5 1/4 cents
per bushel. The Dow Jones Index was 197 points higher with the Nasdaq up
83 points.
LIVE CATTLE: Firm pressure developed in the live
cattle trade late Tuesday. Futures closed $0.20 to $0.50 lower. The
live cattle market was the most stable livestock market Tuesday, but
that's not saying much when both feeder cattle and lean hogs saw
triple-digit losses. Cattle on Feed report estimates being circulated
Tuesday predict a bearish on-feed number in Friday's report, but
expected demand strength helped limit losses in futures. Softness is
still likely in live cattle futures if pressure continues in feeder
cattle. But with markets in the current range, the downside potential of
live cattle futures is limited due to expected demand and potential
buyers willing to re-own positions at these levels. Beef cut-outs were
unavailable at the time these comments were posted.
WEDNESDAY'S CASH CATTLE CALL: Steady. Sluggish
activity is expected early Wednesday following bids and asking prices
remaining undeveloped at this point. Packers are expected to show
limited interest Wednesday, but this could allow for limited trade
midweek given the trend in the South over the last several weeks.
FEEDER CATTLE: Active selling pushed most feeder
cattle futures contracts triple digits lower. The full range of closes
was $1.77 lower to $0.22 higher. Traders continued to liquidate
positions Tuesday. The August contract closed $1.77 per cwt lower, down
$2.50 so far this week on rising corn futures and expectations that
growing supplies will add increased liquidation during late May. Early
estimates for Friday's Cattle on Feed report put April cattle placements
at 114% of last year's level. Even though 2018 posted lighter
placements in the May report, the expected increase of cattle moving
into feedlots would become burdensome to the market. CME cash feeder
index for 5/20 is $132.17, down $0.65.
LEAN HOGS: Hog futures fell late Tuesday as
noncommercial traders added to further liquidation. Futures settled
$0.12 to $1.97 lower. Triple-digit losses developed in nearby contracts
as traders focused more on short-term market shifts rather than
long-term demand potential. The combination of expected strong global
demand and current trade dispute with China is making it hard for
traders to choose a longer-term direction. Limited cash market support
is also causing traders to steadily back away from previous support seen
last week. Even with the current market pressure, lean hog trade
remains well entrenched in a sideways pattern due to the wide market
swings over the past month. Pork cutouts shifted higher following wide
market swings in both direction through the pork complex. Pork cutout
values added $0.54 per cwt, moving to $87.07 per cwt on 341 loads. CME
cash lean index for 5/17 is $84.59, unchanged. DTN Projected lean index
for 5/20 is $84.37, down $0.22.
WEDNESDAY'S CASH HOG CALL: Steady to $1 lower.
Continued pressure is expected midweek in cash hog prices as packers
attempt to further reduce spending levels given the lack of
follow-through support in futures and pork cutout values. Wednesday's
slaughter is expected at 471,000 head. Saturday runs are expected near
43,000 head.
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