DTN Before The Bell Livestock

Livestock Slightly Lower With Outside Support

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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(DTN photo by Nick Scalise)

LIVE CATTLE:

Open: 15 cents lower. October cattle are down a nickel early Wednesday, in spite of bullish help offered from outside markets. Traders are apt to be cautious with futures prices near five-month highs. On the cash side, Monday's weighted average of negotiated steers was roughly $4.00 above the formula price, a supportive sign for cattle prices that packers were actively involved in last week's negotiated market. USDA estimated Tuesday's cattle slaughter at 119,000, down from 121,000 a year ago. Light cash trade took place in Kansas at $100, up a little from last week, but more trade is still waiting to develop. In the North, asking prices start at $165 with no takers yet. Tuesday's boxed beef trade pegged choice prices at $204.24, up almost a dollar from Friday. Selects finished at $190.45, up 56 cents since Friday. Technically, live cattle are one of a handful of commodities that have outperformed the S&P 500 over the past three months, an impressive rebound after a brutal spring of coronavirus-related production hurdles. Total open interest was up 1,062 at 286,977 on Tuesday's lower trade and is up 14,070 from a month ago. August contracts were down 1,336 at 27,494 and October was down 54 at 124,637.

FEEDER CATTLE:

Open: 32 cents lower. September feeder cattle are down 10 cents early Wednesday, but are maintaining the appearance of strong demand as a new month gets underway. In spite of concerns about backed up inventory after slaughter levels dropped this spring, feeder cattle prices show active demand and may have been encouraged by USDA's finding of a 1% smaller calf inventory as of July 1. The Feeder Cash index for August 3 is listed at $140.50, up $0.73 from a week ago and is still encouraging higher trade in the futures market. From a technical viewpoint, September feeder cattle are among the commodity sector's better performers the past three months and the trend is up with prices encountering hesitation near five-month highs. The next level of resistance can be expected at the 2020 high of $157.20. Total open interest was down 306 at 41,971 on Tuesday's modestly lower trade, but is up 4,948 from a month ago. August contracts were down 173 at 6,133 and September contracts were down 375 at 13,385.

LEAN HOGS:

Open: 10 cents lower. October hogs are down 5 cents early Wednesday, holding sideways and struggling to get any lift in futures prices. Meanwhile, the cash market is stalling with Tuesday's negotiated weighted average at $38.78, well below the formula price of $51.25 and a chronic sign that hogs remain readily available. USDA estimated Tuesday's hog slaughter at 474,000, roughly even with a year ago, but down roughly 20,000 head per day from pre-coronavirus slaughter levels. Pork cutouts ended at $65.50 on 465.94 loads Tuesday, up just 19 cents from Friday. Wednesday's packer margin was estimated by Dow Jones at $51.79 per head, still enough incentive for packers to keep buying where processing capacity is available. The Lean Hog Index for August 3 was posted at $52.81, up $1.71 from last week and roughly $3.00 above the August futures contract. Total open interest was down 2,789 at 228,750 on Tuesday's modestly higher trade and has been flat, down 1,828 contracts since the April 14 low. Open interest in the August contract was down 3,361 at 17,734 while October contracts were up 168 at 106,345. Spot lean hogs show the worst performance among U.S. ag commodities over the past three months, a reflection of this year's extremely bearish fundamental situation.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Todd Hultman