DTN Before The Bell Livestock

GENERAL COMMENTS:

Cattle futures have led the market higher Tuesday morning with feeder cattle futures directing the movement of early trade activity. Triple digit gains are seen in nearby feeder cattle futures as traders focus on the limited placement levels seen during April. Live cattle futures are slowly following the direction of feeder cattle, but limited activity is likely to curb price gains through nearby contracts. Corn futures are trading higher in light trade. Stock markets are higher in limited morning trade. Dow Jones is 618 points higher with NASDAQ up 149 points.

LIVE CATTLE:

Open: Steady to 70 cents higher. Higher prices have trickled into live cattle futures Tuesday morning. The overall lack of price support is keeping markets within a relatively tight trading range and could spark some additional underlying support through the entire complex. With cattle on feed numbers coming in at 95% year ago levels with 11.2 million head in feedlots, traders are slightly encouraged by the tighter supplies although the fact that market ready cattle are still backed up in most areas is limiting upward market momentum. Nearby futures are holding gains from 20 to 50 cents per cwt, although concern about lackluster trade through most of the day could quickly erode initial support. Cash market activity is expected to remain sluggish Tuesday with show list distribution and inventory taking the focus following the holiday break. Given the short trading week, it is likely that the front side of market positioning will be reduced, although it may be midweek or later before significant asking prices and bids are seen. Open interest fell 103 positions (259,942). June contracts lost 2,033 positions (34,170) and August contracts added 796 positions (107,178). DTN projected slaughter for Tuesday is 102,000 head.

FEEDER CATTLE:

Open: $1 to $1.50 higher. Feeder cattle futures have led the cattle complex higher following the long holiday weekend. With traders having to wait an additional day to trade Friday's cattle on feed report information, this delay seems to have added increased momentum through the market. Even though all have expected significant cattle placement decreases in April from year ago levels, the variability of estimates before the report created uncertainty of how much impact this would have. Cattle placements are at 78% year ago levels through the month of April, and 92% of March 2020 levels. The fact that on feed numbers have fallen also is pointing to the fact that more aggressive placements may be sought in the near future. Cash index for 5/21 is $126.24, down 0.36. Open interest Friday added 58 positions (29,614).

LEAN HOGS:

Open: Mixed. The initial bounce in nearby lean hog futures prices following the positive movement seen in cattle trade and underlying short covering following Friday's losses was short lived as most contracts are starting to post firm pressure with narrow gains still holding but uncertain in June and July futures. This lack of support is not surprising given the continued focus on large hog supplies available to the market and concerns that packing plant schedules will continue to struggle to regain currency in the market. The higher meat prices at the consumer levels through the Memorial Day Holiday weekend is also to create some uncertainty about further demand for pork products and availability of some products for those who desire to pay the higher prices. Cash hog trade is called $1 lower to $1 higher. Most bids are steady 50 cents higher. Open interest added 400 positions (213,886). June fell 1,177 positions (25,842) and July added 603 positions (64,183). Cash lean index for 5/21 is $63.45, down 1.14. DTN projected slaughter for Tuesday is 401,000 head.

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

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