DTN Before The Bell Livestock

GENERAL COMMENTS:

Firm nearby price pressure is currently being curbed by limited buying in deferred contracts, but the tone of the market is slowly turning more bearish as traders focus on weaker cash market activity and expectations that further softness will develop in beef and pork prices at the end of the week. Corn futures are trading higher in light trade. Stock markets are higher in limited morning trade. Dow Jones is 724 points higher with NASDAQ up 169 points.

LIVE CATTLE:

Open: Mixed. Light trade is seen early Friday morning with early losses in nearby contracts trying to be held to a minimum by narrow gains in deferred futures contracts. The potential for additional end-of-week losses in nearby contracts is adding a slightly bearish tone to the entire live cattle complex with prices hovering near the bottom of the short-term trading range seen over the last couple of weeks. Although long-term support levels are not likely to be tested, the inability to spark underlying support based on widespread losses developing in boxed beef values could further weaken price levels in the near future. Cash cattle activity remains generally quiet Friday morning following a full week of moderate to light trade, which developed once again in very wide trading range. Dressed cattle have been reported from $170 to $187 per cwt, with live cattle traded at $105 to $118 per cwt. These ranges have continued the uncertainty of knowing where overall price averages will land until next week, which has been the case over the last several weeks. Some additional trade is likely to be seen during the day Friday, but just where prices will fall is still uncertain, it will likely remain at the lower end of the range as prices have eroded as the week progressed. Open interest added 931 positions (272,679). June contracts lost 1,443 positions (20,607) and August contracts added 819 positions (124,866). DTN projected slaughter for Friday is 115,000 head.

FEEDER CATTLE:

Open: 50 cents to $1 lower. Firm losses have continued to be seen through the entire feeder cattle complex Friday. For now, nearby feeder cattle trade appears to be building a pricing fence within a $3 to $4 per cwt trading range, which could hold market activity over the near future. With increased focus on falling wholesale beef values and the uncertainty of what impact this will have on future trade activity, traders seem to be comfortable keeping prices moving back and forth in the narrow to moderate range near $135 per cwt in nearby contracts. The lack of significant premium in the market through all contract months continues to leave limited expectations of wide market shifts over the near future. Cash index for 6/3 is $128.65, unchanged. Open interest Thursday added 643 positions (32,000).

LEAN HOGS:

Open: Mixed. Limited early activity has allowed most lean hog futures to shift higher during late week trade. The ability to spark firm buyer support in August futures at opening bell is creating the expectation that additional underlying support may develop through the upcoming weeks despite the concern of sluggish pork demand. Even though pork prices are elevated, it appears that prices are more stable right now than wholesale beef values, and could help to spark renewed buyer activity in all segments in the near future. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to 50 cents lower. Open interest fell 158 positions (216,771). June fell 2,035 positions (13,891) and July slipped 554 positions (63,468). Cash lean index for 6/3 is $55.38, down 1.72. DTN projected slaughter for Friday is 438,000 head. Saturday runs are expected at 329,000 head.

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

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