GENERAL COMMENTS:
Streaky losses in thinly-traded markets on the Friday after Thanksgiving triggered surges of technical selling that exacerbated the already downward trends in live cattle, feeder cattle, and lean hog futures prices. For the nearby feeder cattle contract, that meant weekly losses of more than $9 per cwt, and for certain lean hog contracts, it meant an exploration of fresh contract lows. The catastrophic bearishness doesn't necessarily pass through to the physical market just yet. Cash cattle prices for fed steers and heifers were mostly steady to $1 lower than last week, with live trade in the South taking place at $177 and dressed trade at $280.
The National Direct Afternoon Hog Report showed negotiated swine prices down $1.70 since Wednesday to a weighted average Friday of $57.49 on 2,353 head. Prices ranged from $55 to $60, and the five-day rolling average is now $62.45.
December corn moved down 5 1/2 cents to $4.63 1/4 per bushel and December soybean meal closed down $0.70 per ton to $457.40. The Dow Jones Industrial Average was up 117.12 points and the NASDAQ was down 19.38 points.
From Friday to Friday, livestock futures scored the following changes: December live cattle down $5.50, February live cattle down $5.825, January feeder cattle down $9.175, March feeder cattle down $8.25, December lean hogs down $3.40, February lean hogs down $6.675, December corn down 3 1/4 cents, December soybean meal up $4.80.
LIVE CATTLE:
The live cattle futures market moved decidedly lower Friday, accelerating a pre-existing downward trend on the charts. The December contract closed down $4.225 at $170.25; the February contract closed down $4.30 at $170.975, and the April contract closed down $4.35 at $173.30.
Don't blame the cash cattle market for this momentum; actually, prices for fed steers and heifers were mostly steady to $1 lower than last week, with live trade in the South taking place at $177 and dressed trade at $280. It should also be noted that a variety of other outside markets experienced a sell-off during the shortened post-holiday Friday trading session too, including soybeans down 25 cents and crude oil down $1.80. Therefore, there may not be too much to interpret, fundamentally, about Friday's price action in live cattle futures, but nevertheless, bearish traders may not be in any big hurry to correct the losses when activity resumes next week.
Boxed beef prices were higher: choice up $1.03 ($298.03) and select up $1.14 ($268.76), with a movement of only 57 loads (28.33 loads of choice, 17.03 loads of select, 4.20 loads of trim and 7.09 loads of ground beef).
MONDAY'S CASH CATTLE CALL: Monday's activity will likely be limited to the collection of showlists, but packers may use the shock and awe of Friday's futures implosion as a reason to pressure cash cattle prices.
FEEDER CATTLE:
A close inspection of the minute-by-minute trading orders that came through the livestock sector Friday shows it was the thinly-traded feeder cattle futures market where the volatility began. That may be no big surprise given the relatively low volume of trade in this market even on a good day, but as the technical triggers on the charts kept popping off, the selling activity accelerated not only for feeder cattle futures, but for other sympathetic markets too. Apparently, no brave buyers were willing to step in and catch a falling knife, as they say.
At the end of the session, the January feeder cattle contract was down $7.80 at $219.325, the March contract was down $7.40 at $222.725, and the April contract was down $7.225 at $226.675. Many auction barns paused their sale schedules this week for the Thanksgiving holiday, but prior to all this futures market excitement, actual cash prices for calves had been staying historically strong. Some bearish sentiment may certainly spill over into next week's business, but remember that ultimately the January feeder cattle futures contract ($219.35) will need to converge with the real prices being paid for calves in the countryside (the CME Feeder Cattle Index at $226.94 as of Nov. 21).
LEAN HOGS:
Pork prices continue to slide lower amid abundant supplies, so it was easy for traders in the lean hog futures market to let these prices slip lower Friday too. The December lean hog contract closed down $0.70 at $67.575; the February contract closed down $3.05 at $68.775; and the April contract closed down $3.30 at $75.275. That April contract, for instance, plumbed a fresh contract low during Wednesday's sell-off, hitting $75.05 at one point during the post-holiday shortened session. Other than a seasonal expectation for hog prices to improve into the winter, it would be hard to argue that the market bears have any fundamental reason to reverse the recent price slide.
The afternoon pork cut-out showed the overall carcass value down $0.51 to $84.17. There were 210.81 total loads (186.27 loads of cuts and 24.53 loads of trim). The CME Lean Hog Index for Nov. 20: down $0.34, $74.18, and for 11/24: down $0.28, $73.90. This represents an almost uninterrupted $32 slide since the Aug. 1 high of $106.
MONDAY'S CASH HOG CALL: Steady. There may be a push to make up for this week's lower slaughter volume, but no reason to get wild with higher bids.
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