DTN Before The Bell Livestock

GENERAL COMMENTS:

Strong follow-through buyer support in lean hog futures trade is sparking increased underlying support through the entire complex. Active buying from China last week helped spark additional market gains, but fundamental pressure still continues. Cattle trade is mixed in limited early trade. Corn is trading lower in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 79 points higher with NASDAQ down 284 points.

LIVE CATTLE:

Open: Mixed. Early pressure in live cattle futures trade was short lived as traders quickly focused on short covering opportunities in nearby futures. The underlying tone of the market still remains weak given the pullback from August highs, but traders continue to focus on stronger fundamental support through early 2021, which is limiting technical market pressure at this point. Trade volume is expected to remain sluggish over the next couple of days with very little new information available to traders, allowing prices to continue to wander within the wide sideways trend seen over the last two months. Cash cattle interest still remains limited Thursday morning, although the trade trickling into the market over the last two days is likely to have already set the tone for the week. Cash trade is seen $1 to $2 per cwt lower than last week in the South and $4 per cwt lower in the North. Asking prices remain at $105 live and $165 dressed. Additional business is expected to develop, especially in the North, but it is likely that most parties will try to wrap things up before late Friday. Open interest fell 2,980 positions (293,247). October contracts lost 5,748 positions (107,940) and December contracts added 1,412 positions (72,189). DTN projected slaughter for Thursday is 118,000 head.

FEEDER CATTLE:

Open: Mixed. Underlying pressure continues to Thursday morning following strong price moves lower Wednesday. The inability to hold support levels above $140 per cwt in nearby contracts has sparked renewed bearish technical pressure across the entire complex. The focus on the complex continues to be driven by uncertainty in beef demand following Labor Day combined with concerns that continued strong feeder cattle placements will develop over the next couple of months. This could put additional pressure on feeder cattle prices, as traders quickly back away from seasonal highs seen in August. Cash index for 9/1 is $140.35, down 0.22. Open interest Wednesday added 220 positions (43,197).

LEAN HOGS:

Open: Steady to $1.50 higher. Sharp gains are redeveloping in spot month October futures with triple digit gains seen across the complex. This move higher continues the surge higher through the week. Renewed focus early Thursday morning focused on the strong export sales to China reported in the morning report. China purchased an additional 28,000 metric tons of pork last week, which moved overall exports to all trading partners to over 53,000 metric tons. More than double the typical weekly sales levels seen over the past few weeks. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest added 2,116 positions (220,064). October slipped 1,645 positions (90,836) and December added 2,217 positions (60,796). Cash lean index for 9/1 is $57.51, up 0.71. DTN projected slaughter for Thursday is 481,000 head. Saturday runs are expected at 116,000 head.

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

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