DTN Before The Bell Livestock

GENERAL COMMENTS:

Livestock futures regained previous losses early Wednesday morning as aggressive buyer support moved into nearby live cattle and lean hog trade. The focus on increased buyer support in all nearby contracts is helping to offset concerns of further long-term losses developing in livestock trade. Corn futures are trading lower in mixed trade. Stock markets are higher in limited morning trade. Dow Jones is 228 points higher with NASDAQ up 68 points.

LIVE CATTLE:

Open: 20 cents to $1.30 Higher. Active buyer support has quickly moved back into front month August contracts with prices reaching the $100 per cwt threshold once again. The concerns of wholesale beef price erosion and continued large numbers of cattle waiting to move through the processing system seems to have limited traders previous concerns as prices have quickly regained Tuesday's losses. Even though heat issues continue in most cattle feeding areas, the price support based on the potential for additional death losses and lower gains in the coming days and weeks has offset any demand pressure. Traders are attempting to establish firm footing at current levels, which could easily create additional technical buying support through the end of the month. Cash cattle markets remain generally quiet early Wednesday morning with a few bids of $157 per cwt seen in Nebraska. Asking prices are holding around $100 per cwt live, especially in the South and $160 dressed in the North. Following Tuesday's light trade at $95 per cwt in the South, the focus on steady cash markets is drawing more attention, especially given the lack of support in beef values. Open interest added 3,143 positions (264,847). August contracts lost 8,546 positions (63,630) and October contracts added 7,539 positions (102,182). DTN projected slaughter for Wednesday is 120,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents higher. Underlying support has steadily but slowly returned to feeder cattle futures following firm losses Tuesday. The move lower Tuesday continues to focus on short and long term market and weather uncertainty seen over the last couple of weeks. The ability to curb nearby losses to $136.50 per cwt in spot August futures with the potential of breaking through further short-term resistance levels during the last half of July is helping to bring further uniformity and buyer support back into the complex. October through March contracts are all trading at $139 per cwt, helping to bring some much needed consistency and expectation that renewed buyer support could help to draw additional volume back into the market over the next week. Cash index for 7/13 is $135.62, up 0.43. Open interest Tuesday added 960 positions (40,968).

LEAN HOGS:

Open: Mixed. Buyer support trickled into nearby lean hog futures trade Wednesday morning as traders focused more on covering short positions following Tuesday's shift lower and traders try to find renewed underlying support to help to establish longer-term direction through the end of the week. August futures are leading the market higher with a 65 cent per barrel gain, moving back above $50 per cwt. The ability to hold prices above this level will continue to be the measuring stick for short term market momentum as the downside market shifts are likely to be limited due to previous price pressure. Deferred contracts have shifted lower in limited activity Wednesday as growing tensions with China once again are putting more pressure on the ability to sustain and grow long term pork demand with the country, despite trade agreements already in place. Cash hog trade is called 50 cents lower to 50 cents higher. Most bids are steady to 30 cents higher. Open interest added 1,181 positions (225,491). July fell 375 positions (9,472) and August slipped 3,669 positions (53,622). Cash lean index for 7/13 is $46.08, up 0.42. DTN projected slaughter for Wednesday is 470,000 head. Saturday runs are expected at 193,000 head.

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

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