DTN Before The Bell Livestock

GENERAL COMMENTS:

Firm gains are holding Tuesday morning in all livestock trade. The ability to reverse the weaker tone seen in the market last week could create longer term market support through the entire complex. Corn is trading higher in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 66 points higher with NASDAQ down 9 points.

LIVE CATTLE:

Open: Steady to $1 higher. Follow-through gains have developed in all live cattle futures with December futures leading the complex higher with a $1 per cwt rally. This upward movement is testing initial short-term resistance levels of $113.12 per cwt seen last week. A move above this level could move resistance levels near $114 per cwt and signal firmer longer-term support through the complex. The ability to sustain recent boxed beef support and secure additional cash market gains during the week would reduce the fears of further seasonal pressure during October. But for now, live cattle futures remain stuck in a moderate sideways trend, with no strong fundamental indicators that traders will quickly break out of this pattern. Cash cattle interest remains undeveloped Tuesday morning. With smaller showlists in several states during the week, the expectation that feeders will continue to push the envelope for higher price levels remains certain. Asking prices are not yet developed, but expected to be near $110 per cwt and higher live. Active trade may not develop until midweek or later, but futures market firmness is creating hope of firm cash gains once again. Open interest slipped 335 positions (294,402). October contracts lost 1,012 positions (14,400) and December contracts fell 949 positions (122,632). DTN projected slaughter for Tuesday is 120,000 head.

FEEDER CATTLE:

Open: Steady to 90 cents higher. Firm support is trickling into the feeder cattle complex with traders focusing on the ability to push prices away from support levels near $140 per cwt. November futures moved slightly below these support levels at the end of last week, holding at $139.87 per cwt, but it appears there is growing momentum and commercial support stepping into the market to defend these price levels, at least on a short term basis. The underlying focus on market seasonality and direction of live cattle trade is also taking into account the increased production costs due to recent gains in corn prices. Cash index for 10/2 is $142.74, down 0.22. Open interest Friday fell 370 positions (43,629).

LEAN HOGS:

Open: 30 cents to $1.50 higher. Initial narrow gains seen in lean hog trade have gained early momentum as increased volume moved into nearby contracts. The surge higher in pork cutout values Monday has sparked triple-digit gains in October through February futures contracts as trades focus on the underlying cash and fundamental market support developing in the market during early October. Although the early-week gains cannot be overlooked, the significant back-and-forth price moves in pork cutout values seen during the last couple of weeks is still keeping many traders cautious. Consistent and steady movement higher in pork values will have to be seen in order for futures trade to remain committed to the current market gains. This means pork cutout values through the rest of the week will be very important in the direction and volume level in Lean hog futures trade. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to firm. Open interest added 650 positions (230,566). October slipped 1,733 positions (19,422) and December added 632 positions (96,636). Cash lean index for 10/2 is $77.26, up 0.45. DTN projected slaughter for Tuesday is 489,000 head. Saturday runs are expected near 277,000 head.

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

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