DTN Before The Bell Livestock

GENERAL COMMENTS:

Light activity is seen in livestock futures Monday morning which may set the tone for the entire week. The potential that trade volume and market activity will remain sluggish ahead of the Labor Day weekend could add some uncertainty to cattle and hog markets over the upcoming days. Corn is trading higher in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 172 points lower with NASDAQ down 36 points.

LIVE CATTLE:

Open: Mixed. Nearby live cattle futures opened lower Monday morning, but this pressure was short lived as traders focused on short-covering opportunities, which helped to push October futures 20 to 50 cents higher within the early minutes of trade. Volume is expected to remain very light not only Monday because it is the last day of the month, but most of the week ahead of the Labor Day weekend. This could bring about even more market volatility due to the limited trade activity. Cash markets are quiet with show list distribution and inventory taking the main focus Monday. Limited expectations for price support going into the long weekend could leave packers uninterested in becoming too active most of the week. Open interest fell 1,035 positions (293,168). August contracts lost 389 positions (70) and October contracts slipped 1,822 positions (117,073). DTN projected slaughter for Monday is 118,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents lower. Follow-through pressure is seen in feeder cattle trade Monday morning despite the ability to bounce live cattle futures off initial market lows and spark some underlying buyer support back into the complex. Although the attempt to bring end-of-month short covering seems to be evident in other livestock markets, the feeder cattle futures seems to be focused on backing away from recent highs as seasonal highs appear to have been established the third week of August and are testing short-term support levels at the end of the month. The potential for additional follow-through pressure to develop across the complex over the next couple of weeks could put a stronger seasonal market pullback during the Labor Day period with additional concerns about how fall placements will further impact price levels during the rest of the year. Cash index for 8/26 is $143.02, down 0.60. Open interest Friday fell 10 positions (44,885).

LEAN HOGS:

Open: Mixed. Light buyer support is slowly trickling into the lean hog futures complex with nearby contracts are steady to 20 cents higher with traders focusing on short-covering activity following Friday's losses. The underlying pressure in the complex late last week still is holding a cloud over the market with concern that further pressure will develop in pork cutout values heading into the holiday weekend. Limited hog slaughter is expected over the next week with overall slaughter numbers expected to fall 633,000 from normal rates through next Monday. A portion of this is expected to be picked up from aggressive runs the following Saturday, but this is still likely to leave the market nearly 400,000 short over the entire Labor Day period, further limiting price support in cash and futures trade. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest fell 2,241 positions (214,478). October slipped 1,912 positions (93,972) and December slipped 389 positions (54,569). Cash lean index for 8/27 is $57.05, down 0.07. DTN projected slaughter for Friday is 482,000 head. Saturday runs are expected at 273,000 head.

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

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