DTN Before The Bell Livestock

Limited Trade Keeps Prices Mixed

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

GENERAL COMMENTS:

Livestock futures are lightly traded Wednesday morning with limited mixed movement in cattle trade, while firm losses in nearby lean hog futures is setting the pace for another bearish morning. The concern that follow-through pressure in meat values will have significant impact on futures prices through the end of the week is causing for limited buying interest. Corn futures are trading lower in light trade. Stock markets are higher in limited morning trade. Dow Jones is 261 points higher with NASDAQ up 39 points.

LIVE CATTLE:

Open: Mixed. Live cattle trade have not reverted back to sharp near limit losses early Wednesday morning. But the underlying pressure renewed in June futures is likely to keep buyers on the sidelines for the near future. The focus on boxed beef values tumbling even lower over the coming days is likely to limit additional cattle buying even though prices have shifted well away from prices near $100 per cwt seen last week. This could add even more market pressure to the complex, especially if cash and beef values move lower later in the day. Cash cattle activity remains quiet with bids undeveloped for the morning. Light to moderate trade has been seen each of the last two days. Prices still remain in the same wide range as last week, but prices seem to be steadily eroding from both last week's levels and initial trade this week. This could continue to pressure cash market prices through the upcoming days. Open interest fell 2,953 positions (271,336). June contracts lost 1,678 positions (26,704) and August contracts added 2,485 positions (121,021). DTN projected slaughter for Wednesday is 115,000 head.

FEEDER CATTLE:

Open: Mixed. Limited market activity is seen early Wednesday morning with prices hovering within a 10 to 12 cent trading range. The lack of widespread movement following aggressive losses Tuesday is helping to create some temporary calmness to the market as traders try to cover short positions, despite the concern that further pressure will develop in the near future. Active cash buying support in the feeder cattle markets have continued to curb market bearishness, but traders still remain heavily focused on the direction of live cattle trade during the week. Cash index for 5/29 is $128.96, down 0.40. Open interest Tuesday added 274 positions (30,397).

LEAN HOGS:

Open: Steady to $2 lower. Growing concerns of just how much more pressure will develop through the lean hog complex as prices remain stuck within a very wide trading range, bookmarked by a month-long price swing, that moved prices more than $20 per cwt. The potential that June futures may move below $50 per cwt once again is not in danger of sparking technical weakness, but given the concern that overall demand may slow and pork production is gaining speed, traders remain cautious. Weekly average hog weights continued to erode, falling 0.5 pounds per hog from the previous week. This is causing some uncertainty and confusion as weights should be increasing significantly if hogs are as backed up as reported. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to 50 cents lower. Open interest fell 789 positions (217,110). June fell 983 positions (19,339) and July added 824 positions (65,201). Cash lean index for 5/29 is $59.96, down 1.29. DTN projected slaughter for Wednesday is 429,000 head. Saturday runs are expected at 321,000 head.

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

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Rick Kment