DTN Before The Bell Livestock

GENERAL COMMENTS:

Cattle futures are mixed in a narrow range early Thursday morning. The overall lack of follow through buyer support in the market is disappointing, but not surprising as traders look for additional fundamental support before being able actively step back into the complex. Hog futures remain mixed to mostly lower, as continued concerns of demand growth due to increased Covid cases offset firm export sales results. Corn futures are trading higher in mixed trade. Stock markets are lower in limited morning trade. Dow Jones is 408 points lower with NASDAQ down 53 points.

LIVE CATTLE:

Open: Mixed. Live cattle exchange traded futures remain mixed in a narrow range as nearby contracts are hovering between 10 cents lower and 12 cents higher during initial trade. The break away from previous market gains is disappointing, but not a huge surprise as buyer support has started to weaken as prices neared short-term resistance levels. It is likely that additional but narrow market shifts may develop through the morning, but very little technical or fundamental direction may develop before the end of the month. This will put even more emphasis on the direction and activity levels of cash cattle and boxed beef prices. Cash cattle markets are quiet Thursday morning with bids not being renewed at this point. Asking prices still remain firm with previous levels at $98 to $100 per cwt live in the South and $162 per cwt dressed in the North. Trade earlier in the week posted prices $1 to $2 per cwt above last week's levels, which may set the tone for additional activity the rest of the week. There is still likely to be some additional trade developing over the next two days, but this business may be seen in dribbles and drabs before the end of the week. Open interest added 1,537 positions (283,397). August contracts lost 2,047 positions (35,363) and October contracts added 2,178 positions (123,224). DTN projected slaughter for Thursday is 119,000 head.

FEEDER CATTLE:

Open: Mixed. Cattle trade has been slow to develop in futures trade Thursday morning. Mixed price levels are allowing for a combination of follow through buying and early morning position taking across the complex. This may add even more focus on the direction of outside markets and late week developments in live cattle trade. There is also increased focus on narrow price spreads through the end of the year in feeder cattle futures. The concern that the market remains generally flat ($1.42 per cwt spread in all contracts through January 2021) may keep markets stagnant and trade volumes limited over the coming weeks and months. Cash index for 7/28 is $139.83, up 0.06. Open interest Wednesday added 130 positions (43,030).

LEAN HOGS:

Open: Steady to 50 cents Lower. Lean hog futures trickled lower in early trade Thursday as the overall lack of support in cash and wholesale pork cuts offset moderate to strong pork export sales last week. Initial trade Thursday morning remains mixed with limited direction seen, although October futures still struggle to push prices above $50 per cwt, which could continue to limit underlying buyer support from stepping back into the market. Traders continue to focus on pork demand uncertainty over the coming weeks as hog supplies remain plentiful and the need for consistent slaughter levels will continue in order to avoid another market crisis later in the year. Export sales last week posted a total of 39,600 metric tons of pork sold and 31,500 metric tons shipped during the week. This moved total commitments of pork to 1.39 million tons. China was the largest buyer of pork last week, with a total of 17,800 metric tons, with Mexico coming in a strong second with 15,400 metric tons. The combination of these two purchases made up 83% of all export pork sales for the week, once again emphasizing the reliance of select trading partners for needed and expected export business. Cash hog bids are expected 50 cents lower to $2 per cwt higher with most bids steady to $1 higher. Open interest added 1,977 positions (231,125). August fell 3,081 positions (28,508) and October added 2,935 positions (103,155). Cash lean index for 7/28 is $52.95, up 1.85. DTN projected slaughter for Thursday is 476,000 head. Saturday runs are expected at 182,000 head.

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

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