DTN Before The Bell Livestock

GENERAL COMMENTS:

Limited spill-over buying is seen in nearby live cattle and feeder cattle trade following triple-digit gains Tuesday. The ability to sustain higher prices through the rest of Wednesday's trading session will be critical in sparking additional end-of-week support into the cattle complex. Hog futures are mostly lower on concerns of pork demand in the coming weeks and months. Corn futures are trading mixed in light trade. Stock markets are lower in limited morning trade. Dow Jones is 380 points lower with NASDAQ down 118 points.

LIVE CATTLE:

Open: Mixed. Sharp triple-digit gains seen Tuesday led to limited direction Wednesday morning with traders looking for increased uncertainty as traders move past the early-week cold storage report. Even though significantly reduced beef stocks June 1 bodes well for keeping product levels in check, the concern of how much demand destruction has been done due to elevated retail prices over the last month is still creating trader apathy. Early support in June futures is being curbed by narrowly mixed prices through all other nearby contracts as traders finding it hard to establish a market direction Wednesday morning. Cash cattle markets are expected to remain sluggish once again Wednesday morning. The limited cash trade seen in the North at $95 to $97 live and $152 to $157 dressed through the week is still not enough to establish a good market trend. Generally bids and asking prices through cattle country are hard to pin down, but should become more evident as the day continues. It is likely that trade may continue to trickle in through the rest of the week, but a narrowing price range compared to the past few weeks could help to give the market some much needed structure. Open interest added 2,915 positions (276,711). June contracts lost 1,283 positions (2,591) and August contracts gained 1,355 positions (131,916). DTN projected slaughter for Wednesday is 120,000 head.

FEEDER CATTLE:

Open: Mixed. Narrow gains are holding in nearly all feeder cattle trade as traders focus on the strong support, which quickly developed Tuesday. Although there remains uncertainty about the ability to spark active follow-through buying and move prices outside of the current sideways trading range, the stability in the cattle complex is expected to be viewed as a positive sign in order to secure support levels near $133 per cwt in nearby contracts. Growing focus on the potential to increase short- and long-term beef demand now that wholesale price levels have returned to more normal levels could help to secure commercial and investment traders looking to step back into the cattle complex. Cash index for 6/22 is $128.71, down 0.41. Open interest Tuesday added 473 positions (35,248).

LEAN HOGS:

Open: Mixed. Lean hog futures have quickly backed away from Tuesday's gains with nearby contracts holding 20 to 60 cent losses during early trade. Although there continues to be indications of renewed buyer support slowly trickling into the oversold market status, the concern of pork demand growth through the remainder of summer and fall months may still leave prices near long-term-support levels due to the aggressive amount of hogs available in the market over the upcoming weeks and months. For the week ending June 20, average live weights fell 1 pound from the previous week at 285.6 pounds per head. This is still roughly 2 pounds above year-ago levels, but have fallen nearly 10 pounds per head from the seasonal high set in early May. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to 50 cents lower. Open interest added 727 positions (222,086). July fell 1,014 positions (23,762) and August added 1,058 positions (89,708). Cash lean index for 6/22 is $45.17, up 0.11. DTN projected slaughter for Wednesday is 471,000 head. Saturday runs are expected at 309,000 head.

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

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