DTN Before The Bell Livestock

GENERAL COMMENTS:

Hog futures are leading the market lower as continued pressure in cash and pork values through the week has limited the ability to bring support to futures trade. Average hog weights continued to fall lower last week, raising significant questions of if the hog industry is backed up as much as most believe. Cattle trade are showing very little market "tells" with prices hovering on either side of unchanged during morning trade. Corn futures are trading lower in light trade. Stock markets are mixed in limited morning trade. Dow Jones is 147 points lower with NASDAQ up 66 points.

LIVE CATTLE:

Open: Mixed. Live cattle futures have had a hard time finding any sense of market direction Wednesday morning with prices hovering from 60 cents lower to 50 cents higher in limited but uncertain trade. June futures continue to lead the market higher as the June contracts are currently in delivery. The significant premium in cash markets could cause increased amount of cattle offered for delivery than usual, especially if feeders utilize this to move some of the heavy weight cattle that have been backed up through the system. But the normal cash and futures market relationship is still not likely to be seen, and even the wide basis levels may not spark aggressive delivery of cattle at this point. Limited trade is likely to be seen through most of the morning with traders looking for additional direction from cash trade as well as morning moves in beef values. Cash cattle trade has still remained light so far this week, but the early activity is testing the lower limits of cash markets set last week. This may point to even more market weakness as the week continues with packer activity expected to remain lighter than the previous weeks. Given the continued strong cash market basis levels, and erosion of boxed beef values, it is likely that cash markets will inch closer to current futures trade levels over the coming days and weeks. Open interest gained 342 positions (267,373). June contracts lost 818 positions (12,122) and August contracts added 1,309 positions (127,761). DTN projected slaughter for Wednesday is 118,000 head.

FEEDER CATTLE:

Open: Mixed. Feeder cattle futures remained very quiet in the opening minutes of trade with prices trading between 20 cents lower and 20 cents higher as markets opened with limited short- or long-term direction detected during early trade. August futures are the weakest market moving into the Wednesday session with prices holding a $1 to $2 per cwt discount to fall contracts, but the stability in other nearby contracts is likely to help establish a narrow but firm trading range through most of the morning. Cash index for 6/8 is $129.52, up 0.45. Open interest Tuesday added 31 positions (32,051).

LEAN HOGS:

Open: Steady to 50 cents lower. Narrow losses have slowly developing early Wednesday morning with nearby June through August futures holding losses of 12 to 47 cents per cwt in the early minutes of trade. The continued pressure seen in cash hog trade and pork cutout values is putting more emphasis on the overall lack of demand for pork and current supplies. With daily slaughter rates expected to move back above 450,000 head for the first time since the coronavirus plant closures took hold, more focus will once again be placed on the back of retail and food service demand growth over the next several weeks. Growing uncertainty about how overall export demand will be able to effectively clear product through the summer months is also adding concerns about overall movement of pork through the summer months. Average hog weights tumbled once again last week, falling to 287 pounds per head. This is a 3.3 pound per head loss from last week's levels and continues to instill the trend of lower weight hogs. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to $1 lower. Open interest added 1,393 positions (219,113). June fell 360 positions (13,157) and July slipped 6,109 positions (47,931). Cash lean index for 6/8 is $51.77, down 0.16. DTN projected slaughter for Wednesday is 452,000 head. Saturday runs are expected at 225,000 head.

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

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