DTN Before The Bell Livestock

GENERAL COMMENTS:

Feeder cattle futures are in the drivers' seat early Monday morning as lighter-than-expected cattle placements helping to point to tighter cattle supplies long term. This is bringing spillover buying into all live cattle futures despite trade volume light to moderate during morning trade. Corn futures are trading lower in mixed trade. Stock markets are higher in limited morning trade. Dow Jones is 109 points higher with NASDAQ up 135 points.

LIVE CATTLE:

Open: Steady to $1 Higher. Firm gains quickly developed in live cattle trade at opening bell. But as volume increased, the positivity continues, but initial price support has eased. Traders are focusing on spot-on cattle on feed estimates, to confirm pre-report trade. This helped to take out some of the market protection that had stepped into the market Thursday and Friday before the report release. With October futures not trading near $106 per cwt, the focus will move from supply issues through the near future with overall current and expected short-term beef demand likely to be the biggest factor in market direction and buyer support. Cash cattle are likely to remain undeveloped early in the week with bids and asking prices not expected until at least late in the day, and most likely Tuesday and Wednesday before active interest develops. Show list distribution and inventory taking is likely as packers try to assess needs through the end of the month and early August. Open interest added 2,393 positions (281,136). August contracts lost 1,395 positions (42,662) and October contracts gained 979 positions (118,770). DTN projected slaughter for Monday is 118,000 head.

FEEDER CATTLE:

Open: $1 to $1.50 Higher. Firm buyer support is moving into feeder cattle trade Monday morning. Although the cattle on feed and cattle inventory report is not viewed extremely bullish, the fact that June placements were less than expectations is bringing back some positive buyer support to the feeder cattle and live cattle complex. Cattle placements in feedyards in June increased 2% from year ago, but traders had already priced in expectations of a 3.6% increase. This will point to additional tightness in fed cattle supplies through early 2021, which is already expected to be a factor in long-term price projections. Cash index for 7/22 is $137.96, up 1.54. Open interest Friday fell 674 positions (41,256).

LEAN HOGS:

Open: Mixed. With the exception of December contracts posting firm losses based on limited activity, the lean hog market remains generally quiet with prices mixed in a narrow to moderate range. Pressure in nearby contracts is being offset by limited gains in deferred contract months. There seems to be very little sense of direction in the entire market Monday morning as trade may quickly bounce higher and lower through the morning, although this is not expected to change long-term market moves or traders' expectations of how markets will trade through the end of the summer. Cash hog bids are expected 50 cents lower to $1 per cwt higher with most bids steady to 50 cents higher. Open interest added 1,028 positions (226,027). August fell 2,243 positions (35,455) and October added 1,258 positions (96,306). Cash lean index for 7/23 is $50.13, up 0.44. DTN projected slaughter for Monday is 475,000 head. Saturday runs are expected at 186,000 head.

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

(c) Copyright 2020 DTN, LLC. All rights reserved.