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DTN Midday Livestock Comments 02/05 11:54
Cattle Futures Retract Early Week Gains
Sharp losses have developed through cattle trade Thursday morning as early
week gains seemed to run out of gas following processing speed concerns and
outside market pressure.
Rick Kment
DTN Analyst
GENERAL COMMENTS:
Strong triple-digit losses in live cattle and feeder cattle trade Thursday
morning have focused on a combination of issues, all pointing to a jittery
market at previous price levels. News of workers at the JBS plant in Greeley,
Colorado, planning to strike seemed to be the major point of focus through the
morning. This will affect about 5,000 head of cattle processed daily by the
plant. Given the current structure, it is not unlikely any committed cattle can
be absorbed into the system. But the focus on plants readjusting positions
seems to be focusing on long-term plant viability given the extensive negative
margins in the processing industry at this point. This market shift is not only
affecting live cattle trade but is pushing feeder cattle futures sharply lower.
Light pressure is seen in lean hog market, based primarily on weakness in
outside markets Thursday. March corn is up 4 1/2 at $4.34 and March soybean
meal is up $7.70 at $303.9. The Dow Jones Industrial Average is down 406.44 at
49,094.86.
LIVE CATTLE:
Live cattle futures are quickly backing away from part of early week gains
Thursday morning. Losses of $4 to $5 per cwt are seen at midday, creating some
concern that additional sharp losses may continue to develop over the coming
days. The news focus seems to be pointed to the processing reduction seen in
the JBS Greeley plant based on reported impending strikes at the plant. The
likelihood that this will have a major impact on overall industry processing
capacity beyond a few days is limited given the current structure of the market
and current overall company and industry availability. This industry is not
beyond rerouting trucks to other plants or companies in order to sustain needs
and capacity levels. But watching daily slaughter rates through the month of
February will help give an indicator of overall capacity levels. Firm pressure
in outside markets and weaker beef values cannot be downplayed in the hesitancy
for futures buyers to step into a market which very well could have run out of
oxygen at current price levels. Cash cattle markets are still sluggish with a
few bids on the table in parts of Iowa, and a major packer has offered to "call
in" for $378 in eastern Nebraska. Packer inquiry should continue to improve as
the day progresses, but significant trade volume will likely be delayed until
later today and/or Friday. February live cattle are $3.08 lower at $237.45,
April live cattle are $3.88 lower at $237.925, June live cattle are $3.13 lower
at $234.10. Boxed beef prices are lower: choice down $0.82 ($367.20) and select
down $1.08 ($361.01) with a movement of 48.79 loads (38.54 loads of choice,
4.14 loads of select, zero loads of trim and 6.11 loads of ground beef).
FEEDER CATTLE:
Feeder cattle futures are leading the market lower Thursday. This market
move seems like a general reversal to early week buyer support that flooded the
market during trade Monday and Tuesday. The news cycle focus in the market
seems to be centered on the developing strike at the JBS plant in Greeley, but
this move is likely much more focused on the ability to sustain additional
buyer support at current price levels. Nearby futures have rallied nearly $70
per cwt since the November low, creating a generally unchecked upward market
surge within the entire cattle market. This lack of small to moderate
corrections can make any market vulnerable, including the cattle market which
is focusing on tight supplies. In comparison to the wild shifts seen last fall,
these $4 to $5 per cwt swings seem generally tame. But it does create
significant uncertainty given how lightly traded the feeder cattle market
remains with generally light volume. March feeders are $4.50 lower at $365.575,
April feeders are $4.80 lower at $362.7 and May feeders are $5.53 lower at
$358.225.
LEAN HOGS:
Lean hog futures have been the quiet market through the entire livestock
complex Thursday morning. Spot February futures are leading the market lower
with light pressure, while very narrow losses are seen through the rest of the
contracts. The continued upward move higher in nearby futures since hitting
seasonal lows in November have continued to move prices well above the 40-day
moving average. Recent volatility in cattle trade seems to have lost its
short-term impact on hog traders at this moment as traders continue to look for
continued strong demand support as 2026 develops. At current price levels and
comparative price relationships to beef, the pork industry seems well insulated
to potential economic pressure that may develop over the coming weeks and
months. February lean hogs are $0.73 lower at $87.275, April lean hogs are
$0.35 lower at $98.1 and May lean hogs are $0.15 lower at $101.60. Hog prices
are unreported due to confidentiality on the Daily Direct Morning Hog report.
Pork cutouts totaled 136.75 loads with 120.22 loads of pork cuts and 16.53
loads of trim. Pork cutout values are up $1.69 at $95.00.
ShayLe Stewart can be reached at shayle.stewart@dtn.com
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