DTN Before The Bell Livestock

Mixed Prices Lead To Market Adjustments

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

GENERAL COMMENTS:

Livestock futures are mixed to mostly lower in early Tuesday trade. This pressure is not likely to develop in a moderate to strong market reversal at this point, but more as an opportunity for traders to readjust positions before the next strong market shift develops, potentially later in the week. Corn futures are trading lower in light trade. Stock markets are mixed in limited morning trade. Dow Jones is 152 points lower with NASDAQ up 3 points.

LIVE CATTLE:

Open: Mixed. Live cattle trade remains extremely sluggish Tuesday morning. Although there still remains underlying firmness holding through the complex, the sharp triple-digit gains over the last two trading sessions is making it hard for traders not to take positions, leading to the narrow losses in several contract months. This may spark choppy, but stable market moves through most of the session Tuesday as traders continue to focus on outside market direction and the movement in boxed beef values. Cash cattle market activity remains quiet in all areas Thursday morning following light to moderate trade midweek. Although there is a very good possibility that additional trade will be seen during the day Thursday, at least in some areas, the bulk of trade may be wrapped up for the week as both sides turn their attention to the holiday weekend and market direction through the rest of July. Cash cattle interest still remains quiet with bids and offerer hard to pin down in all areas. The shift away from limited trade trickling in on a daily basis through the week, to previous activity developing at the end of the week may be starting to be seen. This could return to a more normal pricing pattern, which may not give underlying support to cash market prices, but narrower trading ranges and more consistent trade volumes could help to narrow cash market parameters over the next couple of weeks. Open interest slipped 1,901 positions (274,555). August contracts lost 3,553 positions (122,344) and October contracts added 703 positions (68,961). DTN projected slaughter for Tuesday is 121,000 head.

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FEEDER CATTLE:

Open: Steady to 30 cents lower. Narrow losses are seen in feeder cattle futures as traders take a breath following the strong market support seen over the last couple of sessions. Although it is slightly disappointing that follow through buying did not develop early Tuesday morning, the pullback in live cattle trade and uncertainty in the direction of cash markets is causing some limited pressure in feeder cattle trade. Even with the lower price levels during morning activity, the groundwork for firmer price levels, especially in deferred contracts still remains intact. This could help to hold price levels near recent highs through early July. Cash index for 7/3 is $128.88, unchanged. Open interest Monday added 285 positions (37,253).

LEAN HOGS:

Open: Steady to 40 cents lower. Sluggish trade activity is seen early Tuesday morning as traders try to find some underlying longer term support in the market, but the lack of widespread follow-through buying in all livestock markets is leaving prices soft during early trade. August futures have slipped below $49 per cwt during morning trade. Although this does not account for a technical shift in price levels with market still holding initial support levels, the concern that weaker fundamental support in the market could cause further erosion. Despite the limited slaughter levels due to the holiday last week, packers are running aggressive schedules with estimated Saturday runs likely to be well above 250,000 head, helping to keep overall weekly slaughter rates growing steadily due to the amount of hogs in the system. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to firm. Open interest added 636 positions (227,009). July fell 864 positions (18,634) and August slipped 880 positions (82,189). Cash lean index for 7/1 is $45.02, down 0.27. DTN projected slaughter for Tuesday is 468,000 head. Saturday runs are expected near 283,000 head.

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

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Rick Kment