GENERAL COMMENTS:
After live cattle futures fell $3 per cwt over the last three trading sessions, and feeder cattle tumbled $9 per cwt in the same period, buyer support redeveloped Tuesday. For the second week in a row, Tuesday has been the turnaround day in cattle futures. This is creating hope that additional price gains may develop as the week continues, and potentially break out of the weaker market cycle. It is going to take several days of consistent upward support in order for traders to regain confidence that price support has been established.
Hog futures retracted early week gains, but continue to hover in a narrowly sideways trading range as traders focus on both outside markets and cash values during early December. Hog prices closed lower on the Daily Direct Afternoon hog report, down $1.70 with a weighted average of $53.83 on 9,028 hogs. March corn closed up 5 at $4.905 and January soybean meal closed up $9.50 at $417.8. The Dow Jones Industrial Average is down 79.88 at 36,124.56.
LIVE CATTLE:
December live cattle futures have essentially taken the back seat to the February contracts over the past few days with December open interest and volume levels quickly evaporating as contracts near expiration. But the lack of price spread between the two contracts is also limiting overall movement in all nearby contracts. Strong gains developed Tuesday as traders retracted previous losses and moved price levels above the new support levels set Monday. With February futures closing $1.90 per cwt higher, there is some hope that this trend will continue, although firmness in market fundamentals is needed in order to get futures traders excited about an upward price shift in the near future.
Cash cattle is mostly quiet with just a little scattered trade in the South at $171 per cwt and $271 dressed in the North. This is generally $3 to $4 per cwt lower than last week's weighted average, continuing the trend of lower-moving cash markets early in the week. Much more trade is expected later in the week, but it is yet to be determined if it will leak in over the next couple of days, or hold out until late in the week. December live cattle closed $1.25 higher at $168.5, February live cattle closed $1.90 higher at $168.975 and April live cattle closed $1.80 higher at $171.5.
Tuesday's slaughter is estimated at 126,000 head, 1,000 head more than a week ago and 366,000 head less than a year ago. Boxed beef prices closed lower: choice down $1.24 ($293.75) and select down $3.70 ($259.13) with a movement of 154.67 loads (74.95 loads of choice, 38.84 loads of select, 19.77 loads of trim and 21.11 loads of ground beef).
WEDNESDAY'S CATTLE CALL: Steady to $4 Lower. Despite the bounce in futures prices, the development of softer but light cash cattle trade Tuesday could set the tone for lower cash trade once again this week.
FEEDER CATTLE:
Strong gains in feeder cattle futures were welcome relief for the entire complex. Although even with the $4 per cwt gains seen Tuesday, this is just a drop in the bucket compared to the aggressive market losses over the past couple of weeks. Prices still remain near long-term support levels, creating some uncertainty about continued efforts to move prices significantly higher unless overall outside market shifts are seen and renewed noncommercial buyer support floods back into the cattle complex.
January feeders closed $4.18 higher at $214.7, March feeders closed $3.90 higher at $217.475 and April feeders closed $3.95 higher at $221.375. The CME Feeder Cattle Index for December 1: up $0.51, $223.78.
LEAN HOGS:
Firm losses developed in most lean hog futures with nearby futures focusing on $1 to $1.45 per cwt losses as traders slowly backed away from Monday's gains. Given the volatility in the livestock market over the past couple of weeks, it has been hard for lean hog futures not to move contrary to the cattle market. With aggressive short covering activity in both live cattle and feeder cattle trade Tuesday, buyers seemed to avoid the hog market, allowing prices to slip lower, but still maintaining the sideways trading pattern.
December lean hogs closed $1.23 lower at $66.825, February lean hogs closed $1.45 lower at $69.35 and April lean hogs closed $1.45 lower at $76.10. Tuesday's hog slaughter is estimated at 488,000 head, 4,000 head more than a week ago and 0 head less than a year ago. Pork Cutouts totaled 372.22 loads with 313.81 loads of pork cuts and 58.41 loads of trim. Pork cutout values are up $0.24 at $84.67. The CME Lean Hog Index for December 1: down $0.74, $69.84.
WEDNESDAY'S HOG CALL: Steady to $1 Lower. The inability to push cash hogs higher early in the week and softness in futures trade could limit stability in cash bids early Wednesday.
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