DTN Before The Bell Livestock

GENERAL COMMENTS:

Follow-through pressure in live cattle trade Thursday morning is confirming the market weakness that redeveloped midweek. Futures trade is also being pressured by lack of support in cash and wholesale beef values. Hog futures have moved higher with gains in December contracts leading the renewed buyer support. Corn is trading higher in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 195 points lower with NASDAQ down 96 points.

LIVE CATTLE:

Open: Steady to 50 cents lower. Light to moderate follow-through pressure is developing in live cattle trade as traders remain concerned about the developing fundamental weakness seen during the week. The combination of lower cash cattle prices Wednesday and pressure in boxed beef values is adding further pressure across the complex. Most nearby contracts are holding narrow losses of 10 to 20 cents per cwt, but the ability to test lower limits during the morning is adding some uncertainty to short-term market direction. Although cattle supplies are expected to tighten over the coming weeks, there still remains significant uncertainty about retail and food service demand. This could limit buyer interest in nearby and deferred contracts. Cash cattle interest remains quiet early Thursday morning as both sides try to analyze lower cash trade seen Wednesday, and get a feel for additional late week moves. Trade Wednesday was slow to develop with marked sales reported at $108 live and $169 dressed. This is generally 50 cents to $1 per cwt lower than last week's average, and could set the tone for lower moving prices during the week. Asking prices are still holding at previous levels of $111 to $112 live and $172 per cwt dressed. The uncertainty of how many cattle packers need to fill next week's schedule could add to further price pressure in several areas. Open interest liquidated 1,644 positions (273,226). October contracts lost 675 positions (6,304) and December contracts fell 1,227 positions (109,742). DTN projected slaughter for Thursday is 120,000 head.

FEEDER CATTLE:

Open: Mixed. Lackluster interest is seen in feeder cattle trade with early trade hovering on either side of unchanged with prices 10 cents lower to 10 cents higher in most contracts. The underlying softness in the market following a pullback in live cattle trade and concern that further pressure may develop in cash fed cattle prices could keep most traders on the sidelines through the end of the week. Traders in November futures are closely monitoring any move lower, as a break below $135.52 per cwt would indicate a move through current support levels and may spark further liquidation. But November futures still remain well over $1 per cwt above these levels, giving the market some much needed breathing room Thursday morning. Cash index for 10/13 is $140.92, up 0.21. Open interest Wednesday fell 213 positions (41,905).

LEAN HOGS:

Open: Mixed. With spot December contracts now the official front month contract following expiration of October futures, renewed buyer support is moving back into nearby contracts, helping to push prices 70 to 90 cents higher in early month trade. The focus on expected strong export sales reports in the holiday delayed report Friday is helping to move prices through resistance levels, and closer to the $70 per cwt price target. Limited movement is seen in deferred contracts as prices remain mixed in mid to late 2021 contracts based on limited changes in overall pork demand estimates. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady. Open interest added 2,439 positions (230,026). October fell 473 positions (9,617) and December added 1,314 positions (92,466). Cash lean index for 10/13 is $78.24, up 0.03. DTN projected slaughter for Thursday is 488,000 head. Saturday runs are expected near 257,000 head.

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

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