DTN Before The Bell Livestock

GENERAL COMMENTS:

Cattle and hog futures are mostly lower, although the limited volume seen Tuesday morning is allowing for some short covering to develop in select contract months. The weaker direction in the market continues to focus on underlying concern of growing meat supplies and weak demand. Corn futures are trading lower in light trade. Stock markets are lower in limited morning trade. Dow Jones is 387 points lower with NASDAQ down 42 points.

LIVE CATTLE:

Open: Mixed. Early trade remains mostly lower with June contracts holding moderate gains, while the rest of the complex remains weak in limited selling pressure. The overall lack of movement in futures prices continues to focus on the caution through the market faced with the potential of eroding cash markets and falling beef values. Even though some limited pressure may continue to develop, the live cattle complex remains at a significant discount to cash markets already, combined with still increasing slaughter numbers, which may limit overall pressure below the $95 per cwt level. Cash cattle activity is nearly silent with bids and asking prices still hard to pin down for the morning. The development of very light trade in the North at lower money could stimulate additional selling pressure. Given the large amount of cattle purchased in the cash markets over the last few weeks, it is still uncertain just how many cattle packers will end up buying going forward. If bids develop through the day, it is very possible that feeders will jump at the opportunity to sell cattle, leading to potential light trade. Open interest slipped 308 positions (267,112). June contracts lost 1,810 positions (13,021) and August contracts added 1,447 positions (126,454). DTN projected slaughter for Tuesday is 118,000 head.

FEEDER CATTLE:

Open: 50 cents to $1 lower. Firm pressure continues to develop in nearby feeder cattle trade Tuesday morning. With most of the focus centered on August contracts in both price levels and open interest activity, the impact of firm triple-digit losses in each of the last two days continues to add uncertainty through the entire complex. August contracts are trading at $132 per cwt during early trade. Although this is still within the top third of recent price ranges, the overall lack of support in the complex given the expected long-term tightness for fed cattle supplies through the end of the year is very concerning, and could limit further outside market support. Cash index for 6/5 is $129.07, up 1.16. Open interest Monday lost 196 positions (32,020).

LEAN HOGS:

Open: Steady to 50 cents lower. Light market pressure is seen in lean hog futures trade early Tuesday morning. The concern that further cash market pressure may still be coming down the pike given the eroding pork values and overall lack of supply tightness in the market as slaughter numbers have continued to steadily increase over the last couple of weeks. Pork is expected to become much more available through the month of June, which could create a backlash effect given the recent encounters consumers have had with higher prices and previous news reports that meat prices may remain high through the summer months. August contracts have gained increased open interest, becoming the most active contract, but given the timeframe between now and August, July contracts still carry a lot of pricing power for the near future. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to $1 lower. Open interest fell 626 positions (217,423). June fell 935 positions (13,264) and July slipped 5,333 positions (54,038). Cash lean index for 6/5 is $51.93, down 1.42. DTN projected slaughter for Tuesday is 446,000 head. Saturday runs are expected at 226,000 head.

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

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