GENERAL COMMENTS
Cash cattle trade has started with a slow
trickle in the North and South on a live basis. Prices are reported at
$128 per cwt, a $2 decrease from week-ago levels. Although it is likely
most trade will wait until later in the week, the sharp futures price
dip during Wednesday's session seemed to break at least a small number
of cattle loose. The Fed Cattle Exchange Auction today listed 218 head,
with 0 actually sold, 127 head listed as unsold, and 91 head listed as
PO (Passed Offer). The state-by-state breakdown looks like this: Kansas
218 total head, with 0 head sold, 127 head unsold, 91 head listed as PO
($126.25); Nebraska no cattle reported; Texas no cattle reported;
Colorado no cattle reported; Iowa no cattle reported; other states no
cattle reported. The delivery date/weighted averages breakdown is: 1-9
day delivery 218 head total, 0 head sold; 1-17 day delivery no cattle
reported; 10-17 day delivery no cattle reported; 17-30 day delivery no
cattle reported. According to the closing report, the national hog base
is $0.37 lower compared with the Prior Day settlement ($57.00-$64.25)
weighted average $63.92. The corn futures are higher in light activity.
March futures were 3/4 cent higher Wednesday. The Dow Jones Index is 61
points higher with the Nasdaq up 49 points.
LIVE CATTLE
Softness in feeder cattle futures seemed to be
the tipping point at midweek with most contracts holding triple-digit
losses (0.95 to $1.85 lower). Sharp pressure in all contracts allowed
for increased market pressure in the complex and pushed spring and
summer contracts aggressively lower. This move has not yet fully
retracted previous gains, but the lack of consistent buyer interest over
the last couple of days is raising some red flags that underlying
support may be growing weak. Beef cut-outs: higher, $1.52 higher
(select, $211.92) and up $1.45 (choice, $217.37) with moderate demand
and offerings (57 loads of choice cuts, 25 loads of select cuts, 11 load
of trimmings, 21 loads of coarse grinds).
THURSDAY'S CASH CATTLE CALL:
Steady to $2 lower. Strong pressure in futures
trade is starting to weaken the resolve of feedlot managers. The
development of light trade late Wednesday at $128 live basis is likely
to soften prices through the rest of the week. This may be enough to set
the tone of the market, but still a lot of trade needs to take place
before the end of the week.
FEEDER CATTLE:
Sharp losses flooded into the market with
triple-digit pressure seen in all contracts ($2.00 to $3.35 lower). The
inability to draw additional active support early in the week seemed to
create a sense of widespread market pressure through the entire complex.
This, added to the uncertainty in live cattle markets, caused
widespread liquidation to develop at midweek. Nearby contracts fell $3
per cwt or more by the end of the session with traders now faced with
the possibility of aggressive market softness in the near future. CME
cash feeder index for 2/20 is $147.99 down $0.12.
LEAN HOGS:
Firm follow-through buyer support moved into the
lean hog complex, although the pressure in the cattle market quickly
eroded buyer interest through the last half of the day (0.12 to 0.70
higher). Front-month April futures have moved higher, leading the
complex with a 70-cent gain. This moved spot prices to $69.90 per cwt.
Continued moves over $70 per cwt continue to draw increased buyer
activity back into the market and could limit additional weakness
through the end of the month. Moderate to firm pressure quickly
developed in pork cutout prices with all but belly primal cuts moving
lower at midweek. Pork cut-out: $78.73 down $0.99. CME cash lean index
for 2/19 $71.41 down $0.68. DTN Projected lean index for 2/20 $70.78
down $0.63.
THURSDAY'S CASH HOG CALL:
Steady to $1 lower. Continued pressure is
expected in cash hog prices despite the support in futures. This could
limit overall spending activity as most traders are focusing on
increased market volatility through the end of the week. Processing
schedules are expected to be 465,000 head Thursday. Saturday runs are
expected at 124,000 head.
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