DTN Before The Bell Livestock

Livestock Futures Shift Lower Monday

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Nick Scalise)

GENERAL COMMENTS:

Follow-through pressure slowly developed in cattle trade as early trade interest continues to fine tune market positions following the bearish cattle on feed report. Even though placements and overall cattle inventory was greater than expected, the moves was not overall shocking to the market, which may stabilize through the day as more volume returns to the complex. Corn is trading lower in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 356 points higher with NASDAQ up 130 points.

LIVE CATTLE:

Open: Mixed. A weak underlying tone continues to hold early Monday following active pressure Friday and bearishness from Friday's cattle on feed report causing traders to question recent market strength. Front month October futures are holding narrow gains with the rest of the complex under light follow through pressure. It is unlikely that additional aggressive losses will develop without further bearish fundamental market news, but traders remain cautious given the still strong supply of market ready cattle available to packers. This could allow for prices to wander within a narrow to moderate trading range through most of the week. Cash cattle interest is undeveloped as both sides go back to the drawing board with inventory taking and show list distribution the main focus during the day. Asking prices and bids are not expected to be seen until later in the week with the potential for mid to late week activity likely once again. Open interest gained 529 positions (295,421). October contracts lost 1,426 positions (28,751) and December contracts added 1,098 positions (122,303). DTN projected slaughter for Monday is 120,000 head.

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FEEDER CATTLE:

Open: Steady to 50 cents lower. Moderate early morning pressure is seen in feeder cattle futures despite the sharp losses already developing last Friday. The cattle on feed report Friday focused on the key increase in cattle placements of 9% over year-ago levels. Although this is the time of year where placements start to increase, and dry weather conditions in many areas have led to early movements of some cattle to feedyards, the overall concern that even larger placements in the coming months will overshadow any hope that supply tightness will be seen next year. Most of the pressure developed Friday, but there continues to be light trade keeping buyers from stepping back into the market during Monday's trade. Cash index for 9/24 is $142.23, down $0.36. Open interest Friday added 236 positions (44,001).

LEAN HOGS:

Open: Mixed. Spot October contracts continue to surge higher following the aggressive triple-digit gains last Friday and continued buying based on short term needs in the market. The potential to spark immediate buying activity in export markets and recent support in pork values is helping to solidify buyer support in October futures. This moved prices above $72.50 per cwt, and the highest price levels seen since February. But the lack of support through the rest of the complex is creating additional and widespread concern through the hog market. October futures are currently holding a $9 per cwt premium over December futures, which is the most actively traded contract and is a better gauge for the overall tone of the market. The concern that the current buying may not be sustained over the near future and could lead to a major market selloff has most traders quickly breaking away from support in spot contracts Monday morning. Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Open interest added 3,364 positions (229,633). October slipped 412 positions (27,974) and December added 441 positions (94,946). Cash lean index for 9/24 is $74.53, up 0.83. DTN projected slaughter for Monday is 485,000 head. Saturday runs are expected near 178,000 head.

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

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Rick Kment