DTN Before The Bell Livestock

GENERAL COMMENTS:

Strong follow-through support has flooded into lean hog futures early Friday morning. The primary support is seen in spot October futures as traders remain less convinced that significant long-term market impacts will be seen from ASF case in Germany. Cattle futures are mixed in limited trade with live cattle traders looking for additional direction from cash cattle trade at the end of the day. 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 76 points.

LIVE CATTLE:

Open: Mixed. Narrow single-digit price shifts have developed early Friday morning. The active buyer support seen early Thursday following hog market gains seems to have run its course as cattle traders return to daily work and focus less on residual support spilling over from the hog complex. This is keeping prices within a narrow trading range as traders continue to comfortably hold prices above last week's lows, but are unlikely to test resistance levels given the uncertainty in short-term beef demand. This could allow live cattle prices to wander in a narrow trading range over the near future as traders look for additional longer-term direction. Cash markets are still quiet Friday following subdued activity Thursday. It is expected that moderate buying is still needed to take place before the end of the week, but the support in futures trade Thursday gave feeders more confidence to break away from prices earlier in the week. It is still uncertain if packers will increase bids early Friday, given the amount of cattle sold at lower prices Tuesday and Wednesday. Asking prices are at $104 to $105 live in the South and $163 to $164 dressed in the North. Open interest fell 1,301 positions (286,744). October contracts lost 8,935 positions (72,734) and December contracts added 5,153 positions (91,232). DTN projected slaughter for Friday is 119,000 head.

FEEDER CATTLE:

Open: Mixed. Limited activity in feeder cattle trade is focusing more on the ability to bring stability to the complex at the end of the week, rather than setting aggressive price shifts. Following a double market bottom near $138.25 per cwt in October futures, the potential to draw light but stable buying back into the market over the next couple of days could bring about longer-term buyer support. Nearby contracts continue to test short-term resistance levels of $140 per cwt, and a close above these levels in September and October futures is expected to spark renewed support early next week. Cash index for 9/8 is $140.98, up 0.07. Open interest Thursday fell 266 positions (42,041).

LEAN HOGS:

Open: Steady to $4 higher. Sharp gains have flooded the lean hog complex once again with October futures posting the most aggressive support with gains of $4 per cwt in early minutes of trade. The potential to hit expanded limits of $4.50 per cwt becomes very likely given the potential change in export demand possible over the near future. Deferred contracts are showing much less optimism as traders are concerned that pork bans from Germany may not have as much of a long-term impact on the complex as seen in nearby contract months. This could limit activity levels in most contracts although the underlying tone of the market has turned bullish. Export sales last week returned to more normal levels following the surge in China buying the previous week. Of the total 30,200 metric tons sold in the report, 8,900 metric tons were allotted to Mexico, while 8,300 metric tons sold to China. Japan increased buying activity during the first week of September with 5,600 metric tons. Traders will closely watch the sales commitments from South Korea over the upcoming weeks to determine if the new ban on German pork will increase U.S. exports to the country. The expectation is that this will boost exports to the country, but that has to be proven over the next couple of months. Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Open interest gained 845 positions (217,817). October slipped 7,159 positions (62,240) and December added 3,705 positions (77,828). Cash lean index for 9/9 is $62.44, up 0.52. DTN projected slaughter for Friday is 482,000 head. Saturday runs are expected near 410,000 head.

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

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