DTN Midday Livestock Comments 08/05 11:40
Hog Futures Slide Lower on Pressure in Pork Prices
Triple-digit losses in pork cutout values at midweek once again spooked lean
hog traders, which is holding nearby October futures at or near limit losses at
midday. Cattle futures are under light to moderate pressure following renewed
buyer support in grain trade and volatility spilling over from the hog complex.
Rick Kment, DTN Contributing Analyst
Despite holding relatively steady early in the session, nearby live cattle
and feeder cattle futures have started to break under the pressure from lean
hog futures and concerns that additional grain market support will add even
more production costs to livestock trade over the near future. December corn is
up 9 cents per bushel and December soybean meal is up $3.60 per ton. The Dow
Jones Industrial Average is up 190 points.
October live cattle are trading down $0.52 at $128.45, following a strong
rally in grain markets, especially corn prices, which added concerns about
further production costs. Aggressive spillover pressure from the hog market,
which is holding limit losses at midday, is creating some nervousness through
the complex as traders look for direction from not only outside markets, but
hopefully cash prices will continue to gain strength through the end of the
week. Cash trade started to slowly develop Wednesday with prices generally
steady to $1 per higher in the South and most trades at $197 to $198 per cwt.
Northern trade is seen at mostly $121 to $122 per cwt, $1 to $2 per cwt above
last week's weighted average. Bids are still undeveloped through the morning,
but more interest is likely to be seen in the next few hours; however,
additional trade may hold out until sometime Friday. Thursday morning's boxed
beef prices are higher with choice cuts up $2.68 at $292.02 and selects up
$1.73 at $272.88 on a total count of 62 loads. Dow Jones estimated Thursday's
cattle slaughter at 121,000, up from 119,000 a week ago.
September feeders are trading down $0.52 at $162.30, following the rebound
in December corn futures. This continues to add increased price levels for
feeders, offsetting the buyer support which developed across the entire feeder
cattle market at midweek. Feeder cattle prices continue to trade at the top end
of the range seen over the last five years. This could continue to spark
underlying support by feedlot buyers as continued placement tightness is
expected not only over the upcoming weeks but may continue through much of
2022. The CME Feeder Index was priced at $155.97 for August 3.
Lean hog futures tumbled lower Thursday morning as widespread concerns of
further pressure in pork cutout values led to increased selling volume. October
and December contracts are holding limit losses of $3 per cwt at midday. August
futures are trading 80 cents lower, with prices still above $108 per cwt. With
August contract expiration just over a week away, and contracts cash settled to
the CME Lean Hog Index, the relationship between August futures and cash prices
remains closely tied. If December contracts break below $80 per cwt in Friday
trade, further liquidation is likely as traders may continue to remain
concerned about short-term stability in the entire complex. Thursday morning's
weekly export report posted net sales of 38,800 metric tons (mt) reported for
2021 were up 1% from the previous week and 32% from the prior four-week
average. Increases primarily for China (18,300 mt, including decreases of 200
mt, Mexico (9,200 mt, including decreases of 1,100 mt), Japan (3,300 mt,
including decreases of 500 mt), South Korea (3,100 mt, including decreases of
300 mt), and Canada (1,600 mt, including decreases of 400 mt), were offset by
reductions for Nicaragua (200 mt) and Chile (100 mt). Exports of 28,400 mt were
down 5% from the previous week and 2% from the prior four-week average. The
destinations were primarily to Mexico (12,100 mt), China (4,900 mt), Japan
(4,000 mt), Canada (1,900 mt), and South Korea (1,300 mt). Cutouts are
unreported Thursday morning due to packer submission problems, creating delays
in price reporting. Negotiated hog prices are also unreported due to packer
submission problems on the National Direct Morning Hog Report. Dow Jones
estimated Thursday's hog slaughter at 472,000, up from 470,000 a week ago. The
CME Lean Hog Index is estimated at $111.78 for Aug. 3.
Rick Kment can be reached firstname.lastname@example.org
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