DTN Early Word Livestock Comments 10/20 06:22
Cattle Futures Have Expanded Trading Limits
Cattle futures were hit hard Friday as a result of President Trump
indicating the government had a plan to reduce beef prices. That statement
triggered liquidation despite significantly higher cash trade. Hog futures
close mixed with continued uncertainty whether demand will absorb higher
slaughter numbers at higher weights.
Robin Schmahl
DTN Contributing Analyst
Cattle: Steady Futures: Lower Live Equiv: $266.46 +$0.61*
Hogs: Lower Futures: Mixed Lean Equiv: $108.90 +$0.53**
*Based on the formula estimating live cattle equivalent of gross packer
revenue. (The Live Cattle Equiv. The index has been updated to depict recent
changes in live cattle weights and grading percentages.)
** based on formula estimating lean hog equivalent of gross packer revenue.
GENERAL COMMENTS:
Cattle traders liquidated Friday in response to the statement by President
Trump that the government was working on something to lower beef prices. Even
though it was not specified what it would be, it was sufficient to trigger
liquidation despite significantly higher cash cattle trade. Cash cattle traded
$5.00 higher in the South and $9.00 higher for Northern dressed cattle. Boxed
beef prices were higher with choice up $0.66 and select up $1.34. This
combination should have provided support to the market. However, the overbought
market was ripe for a retracement and the announcement by Trump triggered the
liquidation. It is uncertain whether the decline of Friday is overdone as
feeder were locked limit down nearly the entire day. Follow-through selling may
take place early Monday. Added to that was the statement over the weekend by
Trump that the government is considering purchasing beef from Argentina. That
could extend the losses. Bear in mind there are expanded limits Monday. The
limit for live cattle futures is $10.75 and for feeder cattle it is $13.75.
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