DTN Before The Bell Livestock

GENERAL COMMENTS:

Feeder cattle futures surged higher with November contracts sparking the most interest as traders realign positions near the end of the month. Hog markets are still mixed but sharp losses in December contracts are hard to ignore Tuesday morning. Corn is trading lower in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 3 points higher with NASDAQ up 23 points.

LIVE CATTLE:

Open: 50 cents to $1.20 Higher. Firm underlying support is seen in live cattle futures with the bulk of buyer activity in nearby contracts. Feeder cattle markets are leading the live cattle trade higher Tuesday morning with the focus on potential support in cash values and lower feed costs. Live cattle futures still remain extremely range bound within a wide sideways trading pattern, but as December contracts hold above $112 per cwt, traders inch ever closer to resistance levels near $114 per cwt. A close above $113.80 per cwt would create new short term highs, likely sparking limited bullish positive movement through the complex during the fourth quarter of the year. Concerns of further demand growth and current cattle supplies in the pipeline will likely limit significantly further gains in the near future. Cash cattle trade is still undeveloped with asking prices and bids quiet and likely not showing significant interest until midweek. This could delay trade into the month of October, but feeders are likely to expect moderate price gains by the end of the week. Open interest gained 1,725 positions (297,147). October contracts lost 950 positions (27,802) and December contracts added 973 positions (123,276). DTN projected slaughter for Tuesday is 120,000 head.

FEEDER CATTLE:

Open: $1 to $2 higher. Traders have actively and quickly moved into feeder cattle futures once again with November futures leading the market higher with a $1.80 per cwt rally. The strong pullback in corn and lean hog futures trade is allowing for additional trade interest to quickly step back into the feeder complex as they move prices away from short term support levels. Although at this point, upside movement appears to be limited to an additional $2 to $3 per cwt, the ability to move above $145 per cwt in November contracts would likely spark further bullish buying interest. Cash index for 9/24 is $142.23, down 0.36. Open interest Monday fell 492 positions (44,064).

LEAN HOGS:

Open: Mixed. The wide price spread between October and December lean hog futures contracts continue to expand with firm early morning gains flooding into spot October contracts, while other nearby futures are holding moderate to strong losses. The pullback in price levels is most evident in December contracts with triple-digit losses of $1.80 per cwt in early trade. This is widening the October premium to nearly $10 per cwt and creating even more uncertainty through the entire complex. Aggressive short term buying in October futures is based on the expectation that active export business will be reported the next couple of weeks. But traders are much less confident about the ability to sustain demand growth beyond a few weeks. This is leading to active pressure in December through April futures as the industry will still be grappling with larger hog supplies and uncertain domestic and export demand growth. Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Open interest added 571 positions (230,032). October slipped 1,174 positions (26,630) and December added 593 positions (95,538). Cash lean index for 9/25 is $75.42, up 0.89. DTN projected slaughter for Tuesday is 486,000 head. Saturday runs are expected near 179,000 head.

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

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