DTN Before The Bell Livestock

Cattle Trades Focus on Short Covering Activity Early Tuesday

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

GENERAL COMMENTS:

Cattle futures have shifted higher during early trade as traders focus on market corrections following sharp live cattle losses Monday. More normal trade volumes are expected through the rest of the week, likely creating more market consistency in cattle and hog futures. Corn is trading higher in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 42 points lower with NASDAQ down 10 points.

LIVE CATTLE:

Open: 50 to 80 cents higher. Firm buyer support has stepped back into the complex with increased buyer support moving through the entire complex as traders try to offset early holiday pressure which flooded into the market Monday. The limited trade volume Monday likely added even more price volatility to the market, which traders seem willing to correct as the week continues. The ability to maintain firm buyer support through the end of the session is likely to help rekindle moderate support, potentially limiting the bearish market shift as traders still remain optimistic of further demand growth in the near future. Cash cattle activity remains generally quiet. A few scattered sales were reported Monday with Southern deals selling from $107 to $109 per cwt. This business is not enough to establish a market trend, and very likely could be spillover trade from last week. Asking prices are starting to slowly develop in the South at $111 to $112 per cwt, but still are not very active and bids are generally unavailable early Tuesday. Northern cattle markets are undefined with asking prices and bids still very quiet. At this point it is likely to be the last of the week before active trade is seen. Open interest liquidated 5,911 positions (278,195). October contracts lost 1,742 positions (8,237) and December contracts fell 4,675 positions (113,490). DTN projected slaughter for Tuesday is 120,000 head.

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FEEDER CATTLE:

Open: 30 to 70 cents higher. Firm buyer support is slowly but steadily trickling back into the futures complex following early week volatility seen Monday. The focus on live cattle futures able to regain a portion of Monday's losses as well as consistent buyer interest in all feeder cattle futures is adding to the short term market support Tuesday. The ability for November contracts to hold above recent support levels of $135.25 per cwt will go a long way to draw additional buyers back into the feeder cattle complex, potentially establishing a seasonal low during early October. Cash index for 10/9 is $141.28, down 0.64. Open interest Monday added 267 positions (42,673).

LEAN HOGS:

Open: 25 cents to $1.20 lower. Moderate to firm losses have quickly developed in nearby lean hog futures trade. The inability to rekindle buyer support Tuesday following last week's market surge could create additional longer term pressure through the entire complex. December lean hog futures are the only contract posting triple-digit losses, falling below $66 per cwt in morning trade as traders remain cautious given the volatility in the rest of livestock trade as well as shifting outside market moves during the last couple of days. Lean hog futures still remain well entrenched within the bullish market trend, with current moves doing very little to cause technical pressure in the complex. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest slipped 775 positions (226,379). October fell 714 positions (11,101) and December fell 1,017 positions (91,905). Cash lean index for 10/9 is $78.14, up 0.43. DTN projected slaughter for Tuesday is 489,000 head. Saturday runs are expected near 243,000 head.

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

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Rick Kment