DTN Before The Bell Livestock

Mixed Trade Limited Trade Activity

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

GENERAL COMMENTS:

Light buying is seen early Thursday morning with lean hog futures leading the complex higher. The focus on the upcoming hogs and pigs report, which will give the first indication of hog numbers through and following the COVID crisis, will continue to cause some pre-report adjustments through the morning. Corn futures are trading lower in light trade. Stock markets are lower in limited morning trade. Dow Jones is 80 points lower with NASDAQ down 36 points.

LIVE CATTLE:

Open: Mixed. Firm gains in lightly traded June futures have held during the early minutes of trade as prices have now moved above $94 per cwt. August futures trickled lower during the first few minutes of trade, but have since regained limited interest with prices holding narrow gains. The uncertainty about beef demand growth through the summer months while the industry still remains burdened by a backlog of cattle numbers needing slaughtered and increased cattle weights could create additional concerns through the complex. Beef export sales last week totaled 24,400 metric tons, with the South Korea and Japan making the largest purchases of 8,200 and 5,900 metric tons respectively. Cash cattle activity is likely to continue to trickle into the market. The early week trade is giving a generally good framework for where markets may land once all the dust settles. Unlike previous weeks, cash cattle prices are not showing as wide of trading range, which may help to build some consistency through the market. But given the freefall in cash prices over the last few weeks, the previous strong basis levels have been evaporated, leaving narrow basis opportunities compared to spot futures prices. Bids are expected to be seen near Wednesday's price levels at $95 to $97 live and $154 to $156 dressed. Open interest slipped 2,851 positions (274,646). June contracts lost 471 positions (2,120) and August contracts fell 2,402 positions (130,299). DTN projected slaughter for Thursday is 121,000 head.

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FEEDER CATTLE:

Open: Steady to 15 cents lower. Limited market movement is seen Thursday morning as light pressure redeveloping in most live cattle trade. The concern that additional pressure is developing in cash cattle markets as well as further erosion in boxed beef prices has sparked pressure in all nearby contracts. The expectation that nearby support will hold near $132 per cwt, is limiting downward pressure at this point. Cash index for 6/23 is $129.12, up 0.41. Open interest Wednesday added 651 positions (35,899).

LEAN HOGS:

Open: 10 to 80 cents higher. Narrow gains are slowly trickling into the lean hog complex Thursday morning following additional support in July contracts as traders bounce off of long-term support levels of $46 per cwt. August futures which are quickly taking over the spot of front month futures are holding 10 to 12 cent gains during the first few minutes of trade as traders continue to adjust positions in front of this afternoon's reports. The hogs and pigs report is expected to show firm gains in hog numbers over year-ago numbers, with the support of heavier-weight hogs likely to be the main focus of most traders through the afternoon. This report will not be able to be traded until Friday morning, but traders will quickly try to adjust positions to individual expectations. Pork export sales were moderate last week with a total of 24,100 metric tons sold and 29,500 metric tons shipped. China reported 4,500 metric tons purchased from the U.S last week, which given all of the drama over the past couple weeks is encouraging that negative numbers were not seen. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to 50 cents lower. Open interest fell 829 positions (221,214). July fell 1,299 positions (22,472) and August eroded by 1,372 positions (88,334). Cash lean index for 6/23 is $45.10, down 0.07. DTN projected slaughter for Thursday is 474,000 head. Saturday runs are expected at 309,000 head.

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

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Rick Kment