DTN Before The Bell Livestock

GENERAL COMMENTS:

Strong market pressure developed in cattle trade with triple-digit losses holding in live cattle and feeder cattle futures. Although the move lower is disappointing, and backing away from recent market highs, there seems to be little fundamental or technical shift in market direction, allowing these moves to potentially be temporary. Corn futures are trading lower in mixed trade. Stock markets are mixed in limited morning trade. Dow Jones is 122 points lower with NASDAQ up 89 points.

LIVE CATTLE:

Open: 50 cents to 1.50 Lower. Limited trade volume is seen Monday morning despite the triple-digit losses in nearby contracts. Even with the current losses, recent support levels are holding, giving the expectation that traders are not moving too far from the market as they focus on the opportunity to cover positions following recent gains. The wide market swings last week could allow for even more volatile market swings throught he coming days. Cash markets remain quiet with show list distribution and inventory taking likely to take priority through the morning. It is possible that some limited trade may trickle into the market before the end of the day, but more likely active bids and asking prices will be delayed until Tuesday or later. The recent support in futures trade will spark expected higher asking prices, but it is uncertain just how willing packers will be to push prices higher during late July. Open interest added 2,524 positions (274,847). August contracts lost 3,133 positions (63,630) and October contracts added 2,528 positions (102,182). DTN projected slaughter for Monday is 119,000 head.

FEEDER CATTLE:

Open: $1 to $2 Lower. Active selling is seen in feeder cattle trade. Traders are focusing on squaring positions following Friday's gains, but spot August futures are still holding above $140 per cwt at this point despite $1.90 per cwt losses during early trade. The focus on maintaining the bulk of last week's gains should help to limit additional pressure in the complex as traders remain focused on testing resistance levels. Long-term supply tightness is expected to help bring some bullish market support to the complex, but these price gains may be hard to pin down over the near future. Cash index for 7/16 is $136.61, up 1.26. Open interest Friday added 296 positions (41,968).

LEAN HOGS:

Open: Mixed. Early pressure moved into nearby contracts with August and October futures posting triple-digit losses. The lack of underlying support in cash hog prices while packer margins remain strong and recent gains in pork cutout values is creating some pressure during early-week trade. Although prices still remain above the $51 and $50 per cwt respectively in August and October futures, the focus on limited follow through gains as traders questions the ability to sustain long-term support through the complex. The rest of the market remains mixed in a narrow range. This could allow for prices to remain choppy in a narrow to moderate range through most of the day. Open interest fell 4,147 positions (224,190). July fell 2,880 positions (6,289) and August slipped 3,405 positions (47,355). Cash lean index for 7/16 is $47.55, up 0.06. DTN projected slaughter for Monday is 474,000 head.

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

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