DTN Before The Bell Livestock

GENERAL COMMENTS:

Hog futures have surged higher as aggressive buying activity has quickly flooded the market. This may add even more volatility to the complex as traders focus on potentially new markets for U.S. pork over the coming weeks and months. Cattle futures are following the hog market higher with the expectation that the move higher in hog prices will carry through all livestock markets. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 150 points higher with NASDAQ up 146 points.

LIVE CATTLE:

Open: 50 cents to $1 per cwt higher. October live cattle futures have posted strong triple digit gains Thursday morning following spillover support in hog futures. The potential change in pork demand in all export markets based on reports that South Korea has banned German pork will likely have a widespread impact in overall beef demand, affecting nearby live cattle trade. It is still uncertain just how this will impact prices long term, but high emotions in the market Thursday morning have led to aggressive buyer support as traders are quickly jumping on the bandwagon. Cash cattle activity is expected to further develop over the next couple of days. Trade Wednesday seen $2 to $3 per cwt was thought to have set the tone for the week, but it is uncertain how these new developments in futures trade will affect the remainder of cash cattle market still needing to be done. Open interest fell 1,362 positions (292,110). October contracts lost 7,108 positions (90,879) and December contracts added 4,388 positions (82,627). DTN projected slaughter for Wednesday is 119,000 head.

FEEDER CATTLE:

Open: $1 to $2 higher. Feeder cattle futures have surged higher in early trade with the focus on the aggressive moves in the hog market. The potential to spark and maintain strong support in the hog complex is creating significant spill-over optimism in all livestock trade as traders focus on dramatic changes to domestic and export demand for meat in the near future. The ability to maintain this buyer momentum through the complex could quickly change the direction of commercial and noncommercial interest, not only in feeder cattle futures, but could help to give live cattle futures the long term support much needed over the last several months. Cash index for 9/4 is $139.05, down 1.15. Open interest Tuesday fell 465 positions (42,042).

LEAN HOGS:

Open: $3 higher. Nearby lean hog futures are locked in limit higher gains as traders continue to focus on what a ban on German pork will do to potential pork demand. Although at this point, South Korea is the only country to have been reported to implement a ban on German pork, but focus and scope of this development goes much deeper than South Korea and will likely affect many other countries. This is expected to create a significant opportunity for the U.S. pork industry, and likely to spark renewed support through the upcoming weeks and months. Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Open interest fell 1,760 positions (219,459). October slipped 7,501 positions (77,291) and December added 4,468 positions (69,768). Cash lean index for 9/4 is $60.53, up 1.89. DTN projected slaughter for Thursday is 485,000 head. Saturday runs are expected near 410,000 head.

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

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