DTN Before The Bell Livestock

Limited Direction Keeps Trade Mixed

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

GENERAL COMMENTS:

Trade across the entire livestock market remained lackluster early Wednesday morning with traders unable to establish any sense of market direction. The potential for prices to hover in the current market range over the near future may limit additional volume in both cattle and hog futures. Corn futures are trading higher in mixed trade. Stock markets are higher in limited morning trade. Dow Jones is 47 points higher with NASDAQ up 64 points.

LIVE CATTLE:

Open: Mixed. Once again limited support in nearby contracts is being offset by positive moves in deferred contracts. Traders in August through December contracts still remain focused on strong supply levels while overall demand uncertainty due to increased covid cases may linger through the end of the year. Firming prices in 2021 contracts are focusing on tighter supplies through the first half of next year, although there the upside market potential is still thought to be extremely limited. Cash cattle markets are expected to pick up where they left off Tuesday. Bids may be hard to find early in the day, but should pick up as the day continues. Asking prices remain near $100 live in the South and $162 dressed. The early-week trade of $96 live across the South and $157 dressed in Nebraska seems to be the starting point, although the direction of futures trade and beef values will be heavily focused on over the next couple of days. Some trade may be delayed until Friday afternoon's cattle on feed report, which could change from the trickle of trade seen through the week seen over the last few weeks. Open interest added 1,870 positions (278,681). August contracts lost 2,054 positions (48,178) and October contracts added 2,206 positions (118,126). DTN projected slaughter for Wednesday is 120,000 head.

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FEEDER CATTLE:

Open: Steady to 50 cents higher. Limited gains are holding in feeder cattle trade with August futures leading the complex higher, but still unable to secure anything more than a 25 to 30 cent gain in early trade. Traders seem to be much more comfortable with the current trading range as they look for additional direction from market fundamentals as well as outside market moves over the next couple of weeks. Traders are starting to adjust the release of the cattle on feed report released Friday afternoon after markets close. Currently the pre-report estimate is pegging cattle placements in June 3.6% above year ago levels, but the focus on overall weight breakdown in the report could tell more than actual numbers placed on or feed. Cash index for 7/20 is $136.48, up 0.17. Open interest Tuesday gained 367 positions (40,875).

LEAN HOGS:

Open: Steady to $1 higher. Firm follow-through buyer moved into spot August contracts as traders continue to shift prices higher focusing on the limited volume in the front-month futures and strong gains in pork values developing during the week. This could create some limited momentum over the next couple of weeks, although the most actively traded October contract still remains reluctant to show significant support. Although the afternoon cold storage report is not expected to create significant surprises or widespread market changes, traders will closely be focusing on the overall amount of pork and pork products in cold storage at the end of June. This will give a better indication of market clearance as packer production has ramped up and returning to year ago levels. Cash hog bids are expected 50 cents lower to $1 per cwt higher with most bids steady to firm. Open interest added 2,617 positions (221,711). August fell 2,961 positions (41,326) and October added 3,519 positions (92,292). Cash lean index for 7/20 is $47.21, up 1.17. DTN projected slaughter for Wednesday is 475,000 head. Saturday runs are expected at 226,000 head.

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

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Rick Kment