DTN Before The Bell Livestock

GENERAL COMMENTS:

Firm triple-digit losses are seen in feeder cattle and lean hog trade as traders remain concerned about further demand for beef and pork through the remainder of summer and well into fall and winter months. This could limit buyer support in the near future in most livestock contracts. Corn futures are trading higher in light trade. Stock markets are lower in limited morning trade. Dow Jones is 847 points lower with NASDAQ down 205 points.

LIVE CATTLE:

Open: Steady to 60 cents lower. Light pressure is seen in nearby and deferred live cattle trade following the uneasiness through the entire livestock market seen in the last half of the week. The concern that further losses in cash cattle prices and beef values may add to further futures market weakness in nearby and deferred contracts could bring about selling pressure over the next couple of days. Nearby futures are hovering above $95 per cwt, but the ability to break out of the narrowing market trend seems difficult with eroding wholesale values and concerns that overall beef demand may struggle through the end of the year. The surge in retail prices over the last month may have long-lasting impact in consumer-buying patterns until the typical consumer gets the taste of higher-priced beef out of their system. This could take weeks to rekindle previous buying patterns for ground beef. Cash cattle markets are quiet Thursday morning, but the falling cash prices through the week has caused concern of further market losses over the next couple of days. If prices can stabilize Thursday and Friday and remain even with Wednesday levels, it is likely that some will consider this a moral win. But the potential for weaker cash market prices in the coming days will likely leave price ranges extremely wide once again. Open interest fell 1,123 positions (266,250). June contracts lost 1,155 positions (10,966) and August contracts slipped 1,077 positions (126,684). DTN projected slaughter for Thursday is 118,000 head.

FEEDER CATTLE:

Open: $1 to $3 Lower. Feeder cattle futures are taking the brunt of market pressure Thursday morning with active triple-digit losses seen in all contract months. With the weakening outlook for stability in cash cattle and beef values, traders are starting to quickly step away from previous gains in nearby and deferred feeder cattle markets. Although there still remains a desire to gain access to additional cattle to put into feedlots through the summer months, the concern that live cattle and beef prices may not rebound as quickly as some previously expected is starting to erode price support in all feeder cattle markets. Cash index for 6/9 is $129.70, up 0.18. Open interest Tuesday added 525 positions (32,576).

LEAN HOGS:

Open: Mixed. Pork exports can be best described at mediocre in the weekly report Thursday morning. Although additional sales and shipments were seen, and no significant cancelations were reported, a mere 2,600 metric tons of new sales to China is much less than what most had hoped going into the summer months. Total export sales are listed at 17,200 metric tons as Canada and Mexico lead the buyer board for the week. Total shipments of 31,700 tons are seen last week, which continues to move moderate product that was previously committed to normal buyers through early June. Futures were generally unaffected by the report with prices hovering in a narrow but mixed trading range in nearby contracts. The concern of long term demand for pork continues to put more pressure on deferred futures as traders still grapple with large hog supplies available through much of the year. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to 50 cents lower. Open interest added 1,529 positions (220,692). June fell 414 positions (12,886) and July slipped 6,334 positions (41,508). Cash lean index for 6/9 is $51.18, down 0.59. DTN projected slaughter for Thursday is 450,000 head. Saturday runs are expected at 225,000 head.

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

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