DTN Before The Bell Livestock

GENERAL COMMENTS:

Gains in nearby live cattle and feeder cattle trade has sparked renewed optimism through the entire complex. There continues to be underlying support moving into the complex, driven partially by firm cash market support. Hog futures remain mixed to mostly lower with limited support expected through the complex. Corn futures are trading lower in mixed trade. Stock markets are mixed in limited morning trade. Dow Jones is 50 points higher with NASDAQ down 2 points.

LIVE CATTLE:

Open: Steady to 80 cents higher. Moderate to firm gains have slowly but steadily developed in morning live cattle trade. The move higher comes as moderate export sales were reported last week, while firming cash cattle support is sparking renewed interest in nearby live cattle trade. August and October futures remain firming higher, with prices testing recent resistance levels. If October futures are able to move, and close, above $108.27 per cwt at the end of the session, it is expected that follow-through buyer support will develop through the end of the week. The bullish technical support seen in early August is expecting additional firmness in both cash and wholesale beef values in order to maintain the recent price gains. Cash cattle interest remains extremely quiet early Thursday morning, but packer interest and inquiry is expected to improve through the morning. Asking prices remain at $101 to $102 per cwt live in the South and $165 and higher on a dressed basis in the North. Light to moderate trade in the South Wednesday at $99 to $100 per cwt is $2 to $3 per cwt higher than last week's average, but the optimism about continued firming prices may help to boost this support through the next two days. Most of the activity through the end of the week is likely to develop in the North as very few sales have been reported in these areas so far this week. Open interest added 1,142 positions (287,582). August contracts lost 1,990 positions (25,043) and October contracts added 144 positions (124,755). DTN projected slaughter for Thursday is 119,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents higher. Gains are holding in feeder cattle trade following expected further support in cash markets, in both feeder cattle and live cattle trade. But the optimism remains limited given the recent market support as traders need more evidence to suggest that early week gains can continue to hold given the growing uncertainty about beef demand over the next couple of months. September feeder cattle contracts remain at $147 per cwt Thursday morning, which continues to slowly but steadily move through resistance levels and trading at the highest levels since early spring. Continued pressure in corn markets is adding to the short term support as reduced feed prices will be a significant factor in feeders ability to break even through the end of the year. Cash index for 8/4 is $140.60, up 0.10. Open interest Wednesday added 261 positions (42,231).

LEAN HOGS:

Open: Mixed. Market stability in lean hog futures trade is limiting the optimism that additional strong buyer activity will develop in the near future. Although hog supplies still remain readily available and supply tightness is not on the radar anytime soon, the industry and processing schedules continue to be establishing a decent rhythm that may help to continue to set sights on more normalcy through the upcoming weeks. Given that nearby contracts still remain below the $50 per cwt threshold is limiting the bullishness of market direction, but wide price spreads between nearby and deferred contract months is pointing to market support and optimism through next summer months. Currently summer contracts are holding a $26 per cwt premium to nearby futures. Pork export sales last week totaled 30,300 metric tons. With shipments of 34,400 metric tons. Mexico topped the leader board in both new sales and shipments for the week with China recording 5,600 metric tons (mt) of sales and shipments of 9,000 mt. This report may not have significant market impact early Thursday, but is expected to remain slightly disappointing given the hope and expectation of stronger China sales. Cash hog bids are expected 50 cents lower to $1 per cwt higher with most bids steady to 25 cents lower. Open interest fell 978 positions (228,025). August fell 3,515 positions (14,599) and October slipped 378 positions (105,909). Cash lean index for 8/4 is $52.92, up 0.11. DTN projected slaughter for Thursday is 477,000 head. Saturday runs are expected at 225,000 head.

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

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