DTN Before The Bell Livestock

Cattle Gains Continue Wednesday

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

GENERAL COMMENTS:

Strong support in cattle futures early Wednesday morning has sparked renewed interest through the entire complex. This has allowed for strong gains to develop in nearby live cattle and feeder cattle through morning trade. Hog futures are unsupported with front month August futures leading the complex lower. Corn futures are trading lower in mixed trade. Stock markets are higher in limited morning trade. Dow Jones is 9 points higher with NASDAQ up 86 points.

LIVE CATTLE:

Open: Steady to 50 cents higher. Buyer interest is slowly but steadily moving into the live cattle complex Wednesday morning. This is helping to put increased focus on actively traded October contracts, which have moved above $105 per cwt once again. Additional focus will be placed on the ability to drive beef cutout values higher through the end of the week, potentially helping to solidify a seasonal market low, and point to stronger beef prices through the fall and winter. Upcoming beef demand remains a wildcard for the entire complex as no one knows the extent of increased coronavirus cases will have on consumer buying patterns in the near future, as well as upcoming plans for school openings this fall and how this will affect overall beef usage. Cash cattle activity remains sluggish following light trade in the South Tuesday. Asking prices remain between $98 and $100 per cwt live and $162 dressed. It is uncertain just how active packer bids will be early in the day, although interest is expected to improve as the day continues. Open interest added 2,411 positions (279,825). August contracts lost 3,305 positions (37,065) and October contracts fell 729 positions (119,955). DTN projected slaughter for Wednesday is 119,000 head.

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FEEDER CATTLE:

Open: 60 to 90 cents higher. Active buyer support is quickly stepping back into the complex as trades focus on reentering the market following Monday's market pressure. Little has changed fundamentally in the feeder cattle complex, although the continued pressure in corn markets is likely to stimulate additional underlying buyer support in both nearby and deferred contract months. The lack of premium in late-year contracts continues to leave the market in a more neutral position, and could limit further buying during late 2020. Cash index for 7/27 is $139.77, down 0.22. Open interest Tuesday fell 929 positions (41,981).

LEAN HOGS:

Open: Steady to $1 Lower. Active pressure is seen in lean hog futures trade as traders start to back away from the lightly traded front month August contract. This pushed August futures nearly $1 per cwt during early trade as the focus on uncertainty of further pork price support could limit additional buying activity. Reports that China hog numbers are starting to steadily increase will not only impact short-term market direction, but this could impact further support of long-term export demand for China. With most of the market focus on Coronavirus around the world, little attention has been put on African Swine Fever. But if China can contain further outbreaks, and expand the hog herd as they have been attempting to over the last two years, this could go a long way in China becoming self-sustaining in pork supplies, which has long been the goal. Cash hog bids are expected 50 cents lower to $2 per cwt higher with most bids steady to $1 higher. Open interest fell 3,144 positions (225,499). August fell 2,266 positions (31,239) and October slipped 983 positions (97,801). Cash lean index for 7/27 is $51.10, up 0.87. DTN projected slaughter for Wednesday is 477,000 head. Saturday runs are expected at 182,000 head.

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

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Rick Kment