DTN Before The Bell Livestock

Feeder Cattle Lead Markets Lower Monday

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Nick Scalise)

GENERAL COMMENTS:

Moderate to strong pressure is seen in all livestock trade Monday morning. The focus on continued bearish technical moves in lean hog trade as well as concerns of still large cattle on feed supplies is adding early-week pressure to the entire livestock market. Corn futures are trading lower in light trade. Stock markets are lower in limited morning trade. Dow Jones is 41 points lower with NASDAQ down 2 points.

LIVE CATTLE:

Open: Steady to 60 cents Lower. Friday's cattle on feed report has been generally neutral to the live cattle complex. Although overall cattle on feed numbers are lower than year-ago levels, but near the top end of the trading range, traders are making slight adjustments during early-week trade with very little other market direction developing through the complex. The feeder cattle futures are taking the brunt of the selling pressure, although there will be more focus through the rest of the day on the direction of cash cattle trade over the next week and the upcoming cold storage report. This may add some additional late day selling to the complex, although with nearby contracts already dipping below $95 per cwt, limited additional pressure is likely to quickly develop. Cash cattle interest is expected to be slow to develop Monday morning with early focus on show list distribution and inventory taking. The trend for trade to develop a little each day, could spark some early-week movement, but like past weeks it will be hard to get a handle on price direction as cash prices may fluctuate greatly through the week once again. Open interest fell 678 positions (273,080). June contracts lost 1,218 positions (4,475) and August contracts slipped 509 positions (130,144). DTN projected slaughter for Monday is 120,000 head.

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FEEDER CATTLE:

Open: $1 to $1.50 Lower. Active losses have quickly developed in feeder cattle trade Monday morning as traders adjust positions in front of the cattle on feed report released Friday afternoon. The concern that additional losses will continue to develop in the entire cattle market, and especially the feeder cattle trade as the depressed market has limited current feeder cattle placements through the spring and summer months could continue to add moderate pressure to nearby contracts. Lack of price premium in deferred futures continues to add significant concerns through the entire market with all contracts confined to a $3 per cwt price range, limiting the idea of a late fall rally. Cash index for 6/18 is $128.01, down 0.50. Open interest Friday added 614 fell 72 positions (34,232).

LEAN HOGS:

Open: Steady to $1.50 Lower. Lean hog futures have continued to test long term support levels with nearby contracts posting contracts lows once again Monday morning. As slaughter levels continue to slowly increase, the focus has moved away from a supply driven situation and back to the concern of pork demand. With overall movement in the food service industry still very sluggish and showing limited aggressive recovery, the expectation that pork supplies will start to quickly build. The afternoon release of the monthly cold storage report will give the first indication of what product availability has done through the month of May. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to weak. Open interest added 1,055 positions (218,492). July fell 1,152 positions (25,980) and August added 269 positions (87,723). Cash lean index for 6/18 is $45.61, down 0.83. DTN projected slaughter for Monday is 459,000 head.

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

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Rick Kment