DTN Before The Bell Livestock

Light Gains Redevelop Midweek

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Nick Scalise)

GENERAL COMMENTS:

Narrow gains slowly trickled into the market Wednesday morning. Following aggressive gains on Tuesday, this lack of follow-through support remains generally concerning as traders look for increased confirmation of firming market tones and potential trader interest over the near future. Corn futures are trading higher in light trade. Stock markets are mixed in limited morning trade. Dow Jones is 229 points higher with NASDAQ down 81 points.

LIVE CATTLE:

Open: Mixed. Moderate gains are holding in nearby contracts Wednesday morning, but the overall lack of underlying market support following such aggressive early week support seems to be casting a weaker outlook on the potential direction of the market as the week continues. Spot June futures are flirting with $100 per cwt, which would be a significant threshold to hold at the end of the day, but more consistent buyer support will need to develop as the session continues to hold prices above this level. There continues to remain a strong disconnect between the different cattle and beef market sectors, which has been allowing futures, cash and wholesale beef markets to trade in its own respective direction, with limited immediate connection to each other. This will create additional uncertainty through the entire complex moving into the summer months. Cash cattle markets remain quiet early Tuesday morning with bids still hard to pin down for the day. The potential that cash trade may trickle in on a daily basis similar to seen over the last few weeks may point to another wide price range by Friday. Light trade Tuesday developed within a $10 to $15 per cwt trading range, creating the uncertainty of price consistency once again. Asking prices are seen at $120 and higher live and $190 and higher dressed. Given the backlog of market ready cattle needing to find a processing home and limited spots to be filled, feeders still do not seem to have much leverage in the negotiated market. This may continue to be the case over the upcoming weeks and months. Open interest added 277 positions (260,220). June contracts lost 1,235 positions (32,936) and August contracts added 1,024 positions (108,202). DTN projected slaughter for Wednesday is 106,000 head.

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

FEEDER CATTLE:

Open: Steady to 30 cents higher. Even though positive prices are recorded Wednesday morning, the fact that buyers were only able to post 10 to 20 cent gains in most contracts during the first few minutes of trade following limit gains in spot futures Tuesday is very disappointing. This is creating some uncertainty as to how much follow through may be seen in feeder cattle and all cattle prices through the end of the month. There will continue to be increased focus on the movement of feeder cattle during the week and the ability to sustain the higher cash price levels which have started to develop in the recent days. 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 5/22 is $126.96, up 0.72. Open interest Tuesday fell 635 positions (28,961).

LEAN HOGS:

Open: Steady to 50 cents higher. Light buyer support slowly trickled into lean hog futures trade at opening bell Wednesday morning, but the lack of consistent follow-through buying seen in nearby contracts has allowed for narrow losses to develop in June and July futures. A firm undertone still remains through the lean hog complex, although traders remain focused on adjusting positions due to light volume and taking advantage of triple digit gains seen Tuesday. More focus will be placed on outside market moves and the ability to bring stability to pork cutout values as the week progresses. Cash hog trade is called $1 lower to $1 higher. Most bids are steady to firm. Open interest gained 3,095 positions (216,981). June fell 1,482 positions (24,360) and July added 2,591 positions (66,774). Cash lean index for 5/22 is $62.30, down 1.15. DTN projected slaughter for Wednesday is 416,000 head. Saturday runs are expected at 293,000 head.

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

P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]
P[R1] D[300x250] M[300x250] OOP[F] ADUNIT[] T[]
P[R2] D[300x250] M[320x50] OOP[F] ADUNIT[] T[]
DIM[1x3] LBL[] SEL[] IDX[] TMPL[standalone] T[]
P[R3] D[300x250] M[0x0] OOP[F] ADUNIT[] T[]

Rick Kment