DTN Before The Bell Livestock

GENERAL COMMENTS:

Gains are seen in all livestock trade with lean hog and feeder cattle futures setting the tone for higher price levels the first day of September. Limited trade activity through the entire week may limit any significant directional change with traders focusing on the Labor Day weekend which will keep markets closed Monday. Corn is trading lower in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 18 points higher with NASDAQ up 100 points.

LIVE CATTLE:

Open: Steady to 50 cents higher. Even though buyer support is slowly and steadily moving into live cattle trade Tuesday morning, the live cattle complex remains the least active of all livestock markets with traders following the direction of feeder cattle trade. The focus on building off of last week's price pressure is sparking buyer support, but trade volume is expected to remain extremely thin during the rest of the week. The fact that traders may be unable to show significant price movement in the near future is raising questions about further market direction when traders do return more actively next week following the holiday weekend. Cash cattle activity remains quiet Tuesday morning with bids and asking prices not fully developed in any area. There is talk that a few cattle will be priced at $107 per cwt in the South, but both sides seem to be hesitant to put a foot on base at this point. It is uncertain how active trade will be given the short week next week, but packers interest is expected to improve slightly through the day. Even though trade may be sluggish, both sides desire to get business done earlier than later, not running into late Friday afternoon, interfering with weekend plans. Open interest added 2,552 positions (295,735). August contracts lost 70 positions (0) and October contracts slipped 540 positions (116,548). DTN projected slaughter for Tuesday is 119,000 head.

FEEDER CATTLE:

Open: Steady to $1 higher. Firm buyer support is moving into the lightly traded and oversold feeder cattle futures during early September.

Following a three week price slide, which pushed October feeder cattle contracts $9 per cwt lower, traders continue to step back into the market as the calendar rolls to the month of September. This buyer support may not be enough to stop the developing trend lower, but traders are testing support levels, which may limit further short term pressure. The focus in feeder cattle trade has been on the ability to sustain stability in live cattle contracts and recent moves in corn prices. With corn futures edging lower Tuesday morning, a break from the previous gains in production costs could help to add stability back to feeder cattle prices during the first couple weeks of September. Cash index for 8/27 is $141.56, down 1.46. Open interest Monday fell 1,657 positions (43,239).

LEAN HOGS:

Open: 20 to 80 cents higher. Firm gains are most evident in October lean hog futures with prices moving 70 to 80 cents per cwt higher through the morning. The focus on potential price stability and renewed support in pork cutout values late Monday seems to be limiting early week pressure. Even though prices have found some underlying support the first day of September, traders remain cautious not to become overly aggressive given the limited volume during the week. Nearby lean hog futures are oversold given the short term pressure in the market over the last week, as prices continue to wander within the wide sideways trading range established during the month of August. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest added 1,019 positions (215,469). October slipped 60 positions (93,880) and December added 1,307 positions (55,877). Cash lean index for 8/28 is $56.60, down 0.45. DTN projected slaughter for Tuesday is 484,000 head. Saturday runs are expected at 108,000 head.

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

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