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Monday, October 20, 2014  
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DTN Midday Livestock Comments          10/20 12:01

   Cattle Futures Rally Sharply Higher

   Strong gains have redeveloped across nearby cattle futures. This is pushing 
contracts to or near limit highs as traders focus once again on tight supplies 
of cattle. Lean hog futures remain mixed in light Monday trade. 

By Rick Kment
DTN Analyst


   Sharp gains have quickly redeveloped through the live cattle and feeder 
cattle markets. The focus through the complex has been on tight supplies, which 
at least temporarily has offset any demand concerns about selling beef at 
current to higher price levels. Lean hog futures are mixed in a narrow to 
moderate trading range as nearby contracts are weighing on earlier market 
support. Corn prices are lower in light trade. December corn futures are 2 
cents per bushel lower. Stock markets are mixed in light trade. The Dow Jones 
is 52 points lower while Nasdaq is up 29 points.


   Any market weakness that existed late last week was quickly evaporated 
through morning trade as live cattle futures surged near or to limit highs of 
$3 per cwt. This is helping set new trading limits in nearby contracts, with 
the focus still on tight supplies and little emphasis through the morning being 
placed on the ability to sustain beef values. Cash cattle markets remain quiet 
with both asking prices and bids undeveloped so far this week. Following trade 
through the middle of last week, there could be some additional interest 
stepping into the market Tuesday or Wednesday, although sales may not be seen 
until the second half of the week. Beef cut-outs at midday are mixed, $0.11 per 
cwt lower (select) and up $0.64 per cwt (choice) with light movement of 68 
total loads reported (34 loads of choice cuts, 21 loads of select cuts, zero 
loads of trimmings, 13 loads of ground beef).


   The up-and-down teeter-totter routine in the feeder cattle futures continues 
to be seen Monday as aggressive buyer interest quickly moved back into the 
market following limit down trade which developed Friday. Although there remain 
concerns about the sustainability of current price levels through the rest of 
the year and well into 2015, traders keep coming back to the "tight supply" 
argument, which is still able to get the attention of traders. Nearby prices 
are hovering between $2.30 and $2.90 per cwt at midday, although it is 
uncertain just how much further support will be seen through the rest of the 
trading session, and if buyers will push contracts to the $3 per cwt trading 
limit before the end of the day.   


   Early support, which trickled into the lean hog futures market Monday 
morning, was unable to hold through midday in several contracts as traders 
return to a bearish attitude concerning both cash hog and pork values prices 
over the near future. The overall fear of sharply growing supplies through the 
rest of the year and stretching well into 2015 is creating widespread concerns 
through the complex. Nearby futures are holding loses of 70 to 85 cents per 
cwt, while trade through deferred contract months is hovering in a narrowly 
mixed price range. Cash prices are unreported Monday morning. The National Pork 
Plant Report is reported 118 loads selling as prices falling $1.68 per cwt.  
Lean hog index for 10/16 is at $108.21 down 0.89, with a projected two-day 
index of $106.78 down 1.43.

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


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