DTN Before The Bell Livestock

GENERAL COMMENTS:

Firm gains are seen in all nearby livestock futures with August lean hog contracts leading the move higher with a $1.52 per cwt rally. The move off contract lows in lean hog futures is helping to give evidence that a market bottom may have been seen. Light gains are holding in nearby cattle trade, although prices may continue to hover within the current price range over the near future. Corn futures are trading lower in mixed trade. Stock markets are higher in limited morning trade. Dow Jones is 218 points higher with NASDAQ up 100 points.

LIVE CATTLE:

Open: Mixed. Live cattle futures remain firmly higher in most nearby contracts, although the lack of support remains weak as traders focus on 2021 contracts. The overall lack of support in the complex remains focused on the seasonal weakness expected in the complex as well as the inability for boxed beef values to stabilize following the holiday weekend. Widespread open interest liquidation was seen in spot August futures as increased pressure was seen due to the inability to hold prices above $100 per cwt. With August futures trading in the $99 per cwt price range at this point, but still confined within a wide sideways range, the potential to limit any significant market direction could keep additional buyers from stepping into the complex over the near future. Cash cattle markets remain quiet early Thursday, although the tone weekly trade appears to have already been set following developing trade over the last couple of days. Live trade in the South is seen at mostly $95 per cwt and dressed trade of $155 to $160 per cwt. Additional trade is likely to be seen over the next couple of days, but it is uncertain just how price levels will shift before the end of the week. Open interest slipped 8,832 positions (262,568). August contracts lost 13,827 positions (96,433) and October contracts added 4,596 positions (78,980). DTN projected slaughter for Thursday is 120,000 head.

FEEDER CATTLE:

Open: Mixed. Nearby buyer support has slowly but steadily moved into the complex Thursday morning as traders back away from previous losses. The back and forth market shifts continue to allow for market moves within the current trading range. With all feeder cattle futures well contained in a $3 per cwt trading range, the overall lack of premium through the fall and winter months based on the expectation of tighter supplies is adding some long term concerns to the cattle complex. Even with nearby contracts holding light to moderate gains of 20 to 40 cents per cwt, the inability to show significant support through seems to create limited interest in the market, causing the potential of some noncommercial traders backing away from the complex in the near future. Cash index for 7/6 is $130.13, up 1.15. Open interest Tuesday added 65 positions (37,424).

LEAN HOGS:

Open: Mixed. Strong triple-digit gains have moved into nearby contracts with August moving off of contract lows. Triple digit gains in fall contracts has pushed August futures above $49 per cwt. The ability to hold this technical support level is going to be very important to spark renewed buyer support not only through the end of the day, but through the end of the week. Strong gains in pork cutout values midweek is helping to drive additional short term buying interest, although there still remains questions about the upside market potential in the complex. Total export sales last week totaled 31,500 metric tons with China the second largest destination of those sales with 8,100 metric tons. Cash hog trade is called 50 cents lower to 50 cents higher. Most bids are steady to firm. Open interest fell 1,306 positions (228,961). July fell 2,269 positions (14,370) and August slipped 4,557 positions (75,455). Cash lean index for 7/7 is $45.35, down 0.65. DTN projected slaughter for Thursday is 468,000 head. Saturday runs are expected near 276,000 head.

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

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