DTN Midday Livestock Comments 01/27 12:19
The Bears Aren't Hibernating This Winter
Monday seems to be awakening the bears as all three sectors of the livestock
trade are lower, and both lean hogs and feeder cattle contracts nearing limit
By ShayLe Stewart
DTN Livestock Analyst
We sometimes get caught in trap that thinking only internal factors of a
market affect its trade, affect its nature and affect its wellbeing, which is a
big misconception. Let's look at how the markets closed last week for example.
All three of the livestock divisions closed lower even though feeder calves are
selling well in the countryside, the lean hog market was rallying earlier in
the week and Friday's Cattle on Feed Report was largely natural. With all that
taken into consideration, one would have thought that the market would close
steady to somewhat higher. But if we look at the external factors affecting the
livestock markets, we find our answers. The market has slowed its paces; and
rightfully so, in fear of what the coronavirus could amount to. March corn is
down 7 3/4 cents per bushel and March soybean meal is down $1.40. The Dow Jones
Industrial Average is down 335.68 points and NASDAQ is down 135.77 points.
Live cattle contracts are feeling the rest of the complex's pain as prices
fall lower and people from all sides of the industry have the same concerns.
February live cattle are down $2.17 at $122.67, April live cattle are down
$2.95 at $121.32 and June live cattle are down $2.77 at 113.25. Asking prices
have yet to be established and trade isn't expected until later in the week. In
the meantime, it's really a waiting game to see what the virus amounts to and
the implications it will have on the market place.
Formula totals for last week were mixed, higher in Texas, somewhat smaller
in Nebraska, and smaller in Kansas: Kansas 80,110 (down 6,495), Nebraska 59,420
(down 864), Texas 78,949 (up 3,994). Total trade volume was also mixed, higher
in Nebraska and Texas, but lower in Kansas: Kansas 102,284 (down 6,086),
Nebraska 86,702 (up 1,418), Texas 83,330 (up 1,529). New showlists appear to
also be mixed, lower in Kansas and Texas, and higher in Nebraska/Colorado.
Boxed beef prices are mixed: choice down $0.45 ($214.04) and select up $0.84
($211.54) with a movement of 68 loads (50.92 loads of choice, 6.74 loads of
select, zero loads of trim and 10.17 loads of ground beef).
The bearish vibe of the market is wreaking havoc on feeder cattle contracts
as every contract other than the January 2020 contract is now anywhere from
$3.10 to near-limit losses of $4.10. The January feeder cattle contract is
going to be under pressure as the market has three days until the January
contract expires. In the meantime, the cash and futures markets are going to
have to shore up the market's basis as the future's market is lower than going
cash prices, which help explain the current $0.25 gain in the January contract.
January feeders are up $0.25 at $142.10, March feeders are down $4.15 at
$135.55 and April feeders are down $4.20 at $138.30.
Concern for what the coronavirus could amount to has also affected the lean
hog market and is driving prices lower on both the board and in the cash
market. February lean hogs are down $1.62 at $65.60, April lean hogs are down
$2.80 at $70.65 and May lean hogs are down $3.00 at $76.97.
The projected lean hog index for 1/24/2020 is up $0.11 at $61.64, and the
actual for 1/23/2020 is up $0.24 at $61.53. Hog prices are lower on the
National Direct Morning Hog Report, down $0.79 with a weighted average of
$51.91, ranging from $48.00 to $53.00 on 3,826 head sold and five-day rolling
average of $52.18. Pork cutouts total 182.41 loads with 171.26 loads of pork
cuts and 11.15 loads of trim. Pork cutout values: up $1.11, $78.49.
ShayLe Stewart can be reached firstname.lastname@example.org
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