DTN Midday Livestock Comments          08/20 12:16

   Buyers Move Back Into Livestock Futures

   Triple-digit gains quickly developed in livestock futures Tuesday morning, 
building on Monday's support. The ability to hold gains through the end of the 
session will be the test to determine underlying support.

By Rick Kment
DTN Analyst

General Comments

   Strong gains have quickly moved into all livestock futures with nearby 
cattle and hog futures holding triple-digit gains. Previous market pressure is 
starting to slowly crack as consistent buying is moving past the fear of last 
week's losses and traders focus more on long-term market potential. Corn 
futures are lower in light morning trade with September down 4 1/2 cents. Stock 
markets are lower in light trade with the Dow Jones 50 points lower and the 
NASDAQ down 11 points. 

   LIVE CATTLE:

   Strong triple-digit gains have quickly moved into the complex with August 
and October futures trading $1.50 per cwt higher at midday. Although traders 
have backed away from morning highs through the last hour, the underlying 
support in the complex is still developing as traders remain focused on 
rebuilding the oversold market structure through the complex. October futures 
continue to trade just under the $100 per cwt level. A close below this 
threshold would limit follow-through support later in the week. Cash market 
interest remains quiet with bids unavailable in all areas at this point. This 
is not unexpected for a Tuesday morning, and likely packer interest will not 
become active until sometime Wednesday. Asking prices are still trickling into 
the market at $109 live basis in the South and $178 in the North dressed basis. 
Active trade is likely to be pushed off until the last half of the week. Boxed 
beef cut-outs at midday are higher, up $0.45 (select) to up $3.50 (choice) with 
moderate to light offerings of 45 total loads reported (16 loads of choice 
cuts, 19 loads of select cuts, 5 loads of trimmings, 5 loads of ground beef).

   FEEDER CATTLE:

   Feeder cattle futures have slowly pulled away from morning highs as buyer 
interest seems to be stabilizing. Although strong triple-digit gains continue 
to hold across the complex, the concern is that late-day market erosion will 
develop, as has been seen in previous days. Fundamentally, little has changed 
in the cattle complex or feeder cattle market over the last two days. But sharp 
gains in beef cutout values over the last week and lower feed costs are 
starting to slowly work through the entire complex. This will not fully offset 
pressure last week, but as the market builds momentum, additional commercial 
and noncommercial interest is slowly moving back into the complex. This is 
expected to solidify market support over the near future. 

   LEAN HOGS: 

   Active follow-through support has quickly swept through lean hog trade 
Tuesday morning with the December contract leading the complex higher. Although 
the market remains under significant pressure with uncertainty about trade 
relationships and future sales to China and growing pork supplies still looming 
over the market, the ability of traders to move prices away from long-term lows 
is helping to bring renewed stability to the complex. There is growing 
uncertainty about additional price support over the near future given the weak 
fundamental outlook for pork that still continues. Cash prices are lower on the 
National Direct morning cash hog report. The weighted average price is down 
$1.64 at $68.14 per cwt with the range from $58 to $72.50 on 5,620 head 
reported sold. Pork values eroded following triple-digit losses in most primal 
cuts. Pork cutouts fell $0.87 per cwt at $84.11 per cwt with 235 loads traded. 
Lean hog index for 8/16 is $78.55, down $0.47, with a projected two-day index 
is $77.99, down $0.56.

   Rick Kment can be reached at rick.kment@dtn.com 


(CZ)

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