DTN Before The Bell Livestock

GENERAL COMMENTS:

Livestock futures trade remains mixed to mostly higher with strong early gains in nearby lean hog and feeder cattle contracts. August lean hogs continue to lead the buyer support, although traders are quickly rolling out of the front-month contract into October futures. Firmness in cattle trade continues to focus on the upcoming cattle market reports over the next two days. Corn futures are lower in mixed trade. Stock markets are lower in limited morning trade. Dow Jones is 47 points lower with NASDAQ down 4 points.

LIVE CATTLE:

Open: Mixed. Moderate to strong gains in nearby contracts are being tempered by the lack of support through the rest of the complex. August futures continue to secure price levels above $102 per cwt with early 75-cent gains holding as more traders move into the market. But the rest of the complex is mixed with most contracts trading from 10 cents lower to 20 cents higher. The focus on potential cash market support and limited surprises in USDA's Cattle Inventory and Cattle on Feed reports is helping to build limited bullish tones into the market. Even though recent support appears to be holding, there are concerns the upside gains could be limited due to growing concerns about coronavirus cases expanding and the impact on beef demand and processing capacity. Cash cattle markets are expected to pick up where they left off Wednesday. 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 watched closely the next couple of days. Some trade may be delayed until Friday afternoon's Cattle on Feed report. Open interest added 164 positions (278,830). August contracts lost 2,054 positions (48,178) and October contracts added 2,206 positions (118,126). DTN projected slaughter for Thursday is 119,000 head.

FEEDER CATTLE:

Open: Mixed. Support in nearby contracts is overshadowed by the overall lack of buyer interest in deferred contracts early Thursday morning. Some additional pre-report positioning is expected in feeder cattle futures as traders will get a look at semi-annual inventory levels of all cattle Thursday afternoon and the latest Cattle on Feed report Friday afternoon. This could keep the market unsettled until well into next week, although moderate increases in placements are expected in the report. August futures have held gains near $1 per cwt as limited but firm buying is moving into nearby contracts. This is narrowing the price discount to the September contract, but still keeping prices within a $2 per cwt trading range through the end of the year. Cash index for 7/21 is $136.42, down 0.06. Open interest Wednesday gained 707 positions (41,582).

LEAN HOGS: Open: Steady to $1 higher. Steady buyer support moved back into the lean hog complex Thursday morning. There is a full report docket this week for the livestock industry, but the hog market is essentially finished with report news as the Cold Storage report is the only of the major reports that focuses on hog or pork markets. Pork stocks fell 25% from year ago levels, as the supply of pork has been significantly disrupted during the COVID-19 pandemic. This brings additional focus on the potential that overall pork availability will remain tighter through the coming months even though ample hog numbers exist through the system. August futures are holding a $1.30 per cwt rally, as firm support is seen in all nearby contract months. Pork export sales posted 31,800 metric tons (mt) last week. China was the second largest purchaser with 7,200 mt. Mexico led the report with 12,900 mt sold to our southern neighbor. Cash hog bids are expected 50 cents lower to $1 per cwt higher with most bids steady to firm. Open interest added 579 positions (222,293). August fell 2,322 positions (39,004) and October added 1,161 positions (93,455). Cash lean index for 7/21 is $49.42, up 0.78. DTN projected slaughter for Thursday is 475,000 head. Saturday runs are expected at 230,000 head.

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

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