DTN Before The Bell Livestock

GENERAL COMMENTS:

Cattle futures have bounced back from sharp losses seen Monday afternoon, although there remains uncertainty in the complex as mixed trade is seen in all markets. The ability to build on support levels reached Monday could spark renewed but limited buying activity through the rest of the day. Corn futures are trading lower in mixed trade. Stock markets are lower in limited morning trade. Dow Jones is 174 points lower with NASDAQ down 74 points.

LIVE CATTLE:

Open: Mixed. Moderate price swings developed at opening bell in live cattle futures with prices bouncing higher and lower as traders quickly adjust following significant losses Monday. But once the initial flurry of activity subsided, prices moved back into a lackluster routine with prices hover from 22 cents lower to 17 cents higher. Now that major cattle reports have been fully digested for the near future, it appears that traders will slowly get back to work trying to balance fundamental and technical market shifts through the entire complex. Despite the limited trade volume and open interest in August contracts, the ability to hold prices above $100 per cwt through the end of the week will create significant momentum through the entire complex, potentially setting the short term direction of the market over the next several weeks. Cash markets remain dead in the water as bids and asking prices are still not well developed. It is possible that some limited bids may start to surface during the day, although it is very likely that most activity could be delayed until the second half of the week. Open interest added 1,130 positions (282,234). August contracts lost 2,294 positions (40,370) and October contracts gained 1,946 positions (120,682). DTN projected slaughter for Tuesday is 117,000 head.

FEEDER CATTLE:

Open: Mixed. Initial trade in feeder cattle futures seems to be the most volatile of all livestock trade. The sharp triple digit losses Monday in nearby contracts quickly changed chart trends, and sparked widespread gains in open interest as traders took advantage of the price dip. This is helping to spark limited but renewed support in nearby contracts as August futures are trading above $140 per cwt once again. An interesting note, despite the wide moves in prices over the last two days, all nearby contracts remain stuck in a narrow pricing range with August through October contracts trading within a $1 per cwt price range. The lack of discount through the fall could indicate some underlying market support over the coming months as seasonal highs are typically set in late summer months. Cash index for 7/24 is $139.99, up 0.56. Open interest Monday added 1,705 positions (42,829).

LEAN HOGS:

Open: Mixed. Lean hog futures have continued the early-week directional shift with nearby contracts searching for additional support and moving firmly higher, while deferred futures are posting moderate to firm gains. The continued underlying concern on what pork demand will look like through the next year is limiting buyer interest in most 2021 contracts, while nearby futures are being energized by the renewed support in cash hog values and potential gains in pork cuts during late summer. Cash hog bids are expected 50 cents lower to $2 per cwt higher with most bids steady to $1 higher. Open interest added 2,632 positions (228,672). August fell 1,929 positions (33,536) and October added 2,496 positions (98,801). Cash lean index for 7/24 is $50.23, up 0.10. DTN projected slaughter for Tuesday is 475,000 head. Saturday runs are expected at 186,000 head.

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

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