DTN Before The Bell Livestock

GENERAL COMMENTS:

Narrow trading ranges are seen in most cattle and hog futures Thursday morning. Limited attention is being given to the weekly export sales report as no significant surprises were worthy of traders stepping away from current market strategies. Continued focus will be on the direction of cash market trade and wholesale meat values through the end of the week. Corn futures are trading higher in light trade. Stock markets are mixed in limited morning trade. Dow Jones is 16 points lower with NASDAQ up 25 points.

LIVE CATTLE:

Open: Mixed. Limited market activity is seen early Thursday morning as traders try to find some market stability during early June. With June contracts lightly traded, the focus on hovering summer contracts near $95 to $97 per cwt seems to be gaining some underlying support as traders focus on eroding wholesale beef values in order to get markets back inline after the last couple of months. This could limit additional significant market support in the near future, although increased open interest has continued to develop, indicating that traders are starting to step back into the complex after recently abandoning the market. Export sales for the last week in May showed little to no surprises with a total of 12,300 metric tons sold, with Japan and South Korea being the usual major customers once again. Total shipments was limited to 9,600 metric tons, with Japan ports being the largest recipient of weekly beef shipments. The export sales report is expected to have very little impact in overall trade direction Thursday. Cash cattle markets are expected to remain sluggish early Thursday morning, although both sides will show more activity as the day progresses. Although light to moderate trade has already developed during the week, the expectation that additional trade will trickle into the market could point to additional market direction. So far, prices have been generally steady with last week's average price, but have slowly eroded from initial Monday activity. This could help to establish a better price direction through the end of the week, and likely set the tone for trade in the coming weeks. Open interest added 3,322 positions (271,652). June contracts lost 2,301 positions (21,954) and August contracts added 3,380 positions (124,047). DTN projected slaughter for Thursday is 115,000 head.

FEEDER CATTLE:

Open: Mixed. Once again, feeder cattle trade is starting mixed in a narrow range with prices generally steady to slightly higher Thursday morning. The late day buying support seen across the complex seems to be a growing trend as traders hover on the sidelines early in the session, only to become much more aggressive based on other market moves. Cash index for 6/2 is $128.65, up 0.40. Open interest Wednesday added 960 positions (31,357).

LEAN HOGS:

Open: Steady to $2 lower. Export sales during the last week in May were light to moderate, but carry a generally disappointing tone to the report with overall export sales reported at 17,300 metric tons. China weighed in at 3,400 metric tons, which is not surprising given the ongoing tensions, but disappointing nonetheless. Mexico continued to be the big winner in the export sales game, buying nearly 1/2 of the total export sales with a total of 8,500 metric tons last week. There is some additional uncertainty about just how much active buying will be done by China over the near future, which could further limit overall pork sales and movements during the summer months. Lean hog futures remain sluggish with prices hovering in a narrowly mixed trading range with the exception of lightly traded June futures still holding moderate losses. The limit losses in these June contracts Wednesday has allowed for expanded trading limits, although the weaker market trend is having a hard time moving into other contract months. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to 50 cents lower. Open interest fell 300 positions (216,907). June fell 1,806 positions (15,906) and July added 156 positions (64,020). Cash lean index for 6/2 is $57.06, down 2.17. DTN projected slaughter for Thursday is 435,000 head. Saturday runs are expected at 333,000 head.

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

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