Thursday Morning Livestock Market Update - Cattle Pressure Expected to Continue

GENERAL COMMENTS:

The strong market shift lower Wednesday is expected to draw additional selling activity back into the complex Thursday morning. With cattle markets holding triple-digit losses through most of the midweek session in nearly all contract months, the focus on additional volatility being added to the market is leaving trade weak. Nearby contracts have quickly pulled away from recent 2018 highs. At this point, there is little danger of breaking through short-term support levels as April futures would need to fall another $3 per cwt before additional concerns would develop. But the concern of not being able to hold previous market gains may add even more market uncertainty. Cash cattle markets remain weak with limited activity in the complex. Light trade developed at $128 per cwt on a live basis, which is $2 per cwt lower than last week. This may bring additional packer interest to the market although initial interest is expected to remain sluggish Thursday morning.

Strong buyer support is moving into the complex with traders looking to move back into the complex following the recent market lows. It is uncertain just how much additional buyer support can develop given the pressure developing in the cattle markets. April contracts will need to move 70 cents per cwt higher in the near future in order to move through short-term support levels and spark additional buyer activity. Otherwise the market may continue to chop around in a narrow but well defined sideways pattern over the next couple of trading sessions. Daily procurement levels are targeted at 465,000 head Thursday with an estimated 126,000 head on Saturday.

	BULL SIDE		BEAR SIDE
1)	Continued strong support in boxed beef values isbringing a sense of stability back to the beef market as traders focus on moving beef products at higher market values through the end of the month.	1)	Aggressive market pressure seen in live cattle and feeder cattle futures quickly broke away from recent market highs. This is leaving the door open for a major market correction that could significantly impact nearby contract direction and push prices lower through the upcoming weeks.
2)	Cattle placements are estimated to be nearly steady with year-ago levels in Friday's upcoming Cattle on Feed report. This would help limit the underlying pressure in the market.	2)	Cash cattle trade started to crack late Wednesday with the triple-digit futures market losses eroding the resolve of feedlot managers. Although most of the cattle trade is yet to develop, the tone may have been set by the few cattle traded at $2 per cwt lower than last week.
3)	The firm buyer support in the lean hog futures despite the losses in cattle trade is helping to solidify buyer activity in all contracts. This could build even more support through the end of the week.	3)	Wavering support in pork cutout values is adding uncertainty to the complex. There is growing concern that the early-week support may not be able to hold despite follow-through gains in futures trade.
4)	Underlying pork demand remains strong through early 2018 with increased focus on active movement in both domestic and export markets. This is likely to limit long-term pressure across the complex.	4)	Cash hog prices continue to erode slowly following light-to-moderate activity in the complex. This is pointing to additional pressure early Thursday morning with traders focusing on the ability for packers to still gain needed hogs at steady to lower price levels.

Wednesday Closing Livestock Market Summary - Cattle Futures Tumble Lower Wednesday

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.

Wednesday Midday Livestock Market Summary - Pressure Develops in Cattle Trade Midweek

GENERAL COMMENTS: 

Sharp losses have quickly flooded into the complex with triple digit pressure holding in both live cattle and feeder cattle trade. This overall lack of direction in the market may continue to add uncertainty to the entire market. Hog futures have backed away from early gains, but continue to hold moderate gains. Corn prices are steady to higher in light trade. March corn futures are 3/4 cent higher Wednesday. Stock markets are higher in light trade. The Dow Jones is 101 points higher while Nasdaq is up 56 points.

LIVE CATTLE:

Sharp losses have quickly developed across all cattle trade as the feeder cattle market continues to lead the live cattle futures lower. What started out as narrow to moderate losses has quickly developed into a triple-digit market tumble as nearby contracts are trading near $2.50 per cwt lower. This not only is affecting potential trade activity, but is likely to change the tone of the market, which has posted moderate to strong gains over the last week. Cash cattle trade still remains quiet with a few token bids developing at $127 per cwt in the South and $205 in the North. Asking prices are seen in the South at $132 per cwt although Northern cattle have not been priced at this point. The Fed Cattle Exchange Auction today listed a total of 218 head, with zero actually sold, 127 head listed as unsold, and 91 head listed as PO (Passed Offer). The state by state breakdown looks like this: KS 218 total head, with zero head sold, 127 head unsold, 91 head listed as PO ($126.25); NE - no cattle reported; TX - no cattle reported; CO - no cattle reported; IA - no cattle reported; other states - no cattle reported. The delivery date/weighted averages breakdown is as listed: 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. Boxed Beef cut-outs at midday are higher, $0.85 higher (select) and up $1.93 per cwt (choice) with light movement of 61 total loads reported (32 loads of choice cuts, 9 loads of select cuts, 5 loads of trimmings, 15 loads of ground beef).

FEEDER CATTLE:

Sharp losses have quickly developed across the complex with traders focusing on increased market pressure in all cattle trade. This has moved nearby futures from $3 to $3.50 per cwt lower as the overall lack of direction in the market continues to limit market support. There is also a growing sense of market liquidation seen in the market following the inability to aggressively push prices higher at the end of last week and initial trade this week. Volatility in the market is expected to continue through much of the week.

LEAN HOGS:

Light to moderate buyer support is stepping into the lean hog futures complex. This is adding to the market uncertainty following strong triple-digit gains seen early in the session. The support through the week is helping to draw additional trade to the market, but it is uncertain just how much long support this will build through the entire complex term. Cash prices are lower on the National Direct morning cash hog report. The weighted average price is down $0.23 at $64.06 per cwt with the range from $57.00 to $64.16 on 3,005 head reported sold. Cash prices are unreported due to confidentiality on the Iowa/Minnesota Direct morning cash hog report. The National Pork Plant Report posted 171 loads selling with carcass values falling $0.68 per cwt. Lean hog index for 2/19 is at $71.41, down 0.80 with a projected two-day index of $70.78, down 0.683.

Wednesday Morning Livestock Market Summary - Support Expected Midweek

GENERAL COMMENTS:

Light-to-moderate trade activity is expected to redevelop early Wednesday morning in all live cattle and feeder cattle futures. The mixed moves early in the week helped to draw some additional follow-through support to nearby contracts. Deferred contracts have limited market direction and a growing uncertainty as to just how strong the buyer support will be over the near future. Some additional longer-term activity is likely, which may help bring additional support back to the table. Cash cattle trade is undeveloped. This may improve through the day, but active trade is still expected to be pushed off until sometime Thursday or Friday. 

 

Strong market support is quickly developing across the lean hog futures trade, which continues to draw increased overall activity through the complex. There is growing support through the market, which may continue to help spark follow-through activity during the next couple of days. Even though there is the uncertainty of long-term aggressive support developing in the hog complex, the severely oversold market has caused traders to become more active through the last half of February. Cash hog prices are expected to remain in the same range as seen earlier with most bids expected steady to $1 per cwt lower. Daily procurement levels are targeted at 465,000 head Wednesday with an estimated 102,000 head on Saturday.

	BULL SIDE		BEAR SIDE
1)	Bullish expectations of cattle feeders following the market rally last week is keeping any expectations of steady markets at bay by feedlot managers. This will keep asking prices firm through most of the week.	1)	The inability to spark follow-through buyer support in deferred cattle trade is expected to draw additional longer-term pressure on the cattle complex. This may add even more uncertainty through early trade Wednesday.
2)	Early estimates for the upcoming Cattle on Feed report is focusing on a strong movement in cattle marketed through the month of January. Initial expectations are pegging marketings near 106%.	2)	Early estimates of total cattle on feed numbers for the month of January are pegged near 107%. This may add even more uncertainty to the complex as the reality of increased cattle numbers in the pipeline may continue to weigh on the overall long-term direction of the market.
3)	Strong upward movement in lean hog futures Tuesday helped to post triple-digit gains in all nearby contracts. This is expected to help spark additional buyer interest through the near future as traders try to move off of recent market lows.	3)	Cash hog prices continue to be unable to move significantly higher over the last couple of weeks, focusing on the additional and strong uncertainty through the rest of the complex. There is growing interest through the complex as packers remain focused on current margins.
4)	Pork values have quickly bounced higher through the early part of the week. This support in all primal values is not only focusing on the strength in futures trade, but indicating that overall pork movement is also remaining firm.	4)	Despite the one-day rally in lean hog futures Tuesday, the overall tone of the complex remains weak given that prices still remain near the bottom end of the trading range, limited confidence is seen that will continue to market support over the long term.