DTN Before The Bell Livestock

GENERAL COMMENTS:

Light to moderate gains are seen in live cattle and feeder cattle futures as traders try to stabilize the market following aggressive near limit losses Monday. It is still questionable if current buying interest is deep enough to last the entire session, or if the bearish market tone will slowly erode any sense of support seen early Tuesday. Hog futures are posting sharp losses with nearby futures leading the shift lower on concerns of widespread liquidation developing in nearby contracts. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 161 points higher with NASDAQ up 46 points.

LIVE CATTLE:

Open: 50 cents to $1 higher. Trader's main priority early Tuesday morning is covering short positions seen Monday. Although the market remains weak, the emotional downturn in the complex sparked overly aggressive selling early in the week. It is likely that most of the trade Tuesday will be focused on bringing a sense of balance back to live cattle futures prices, although the tone of the market still remains extremely bearish. Continued erosion of open interest over the last couple of weeks is limiting the overall market movement in the market and pointing to additional market pressure in the near future. Short- and long-term beef demand continues to be a main concern through the live cattle complex, as beef cutout values continue to slowly erode through October, limiting futures and cash market optimism. Cash cattle trade through the week may continue to get even more interesting. Typically, late-week trade would be expected given defensive moves last week and both sides looking for direction from Friday's cattle on feed report. But Monday sales in several areas following the price tumble in futures market indicates that feeders are willing sellers with the concern that prices will continue to quickly erode through the week. Asking prices are seen around $108 in the South, but still hard to pin down through the North, while bids are not yet redeveloped Tuesday. Open interest liquidated 1,070 positions (268,203). October contracts lost 1,088 positions (3,966) and December contracts added 548 positions (107,467). DTN projected slaughter for Tuesday is 119,000 head.

FEEDER CATTLE:

Open: Mixed. Most feeder cattle contracts are focused on covering short positions following aggressive Monday losses. Lightly traded October contracts are the only contract holding losses during initial trade, although November futures have struggled to gain active buyer support, only trading 10 cents higher during the first few minutes of activity. The sharp technical pressure seen Monday is leaving the complex generally oversold, which should allow for a moderate price bounce over the next couple of days. It is uncertain just how much volume will step back into the market through the morning, helping to sustain early gains. Cash index for 10/16 is $140.26, up 0.02. Open interest Monday added 132 positions (43,681).

LEAN HOGS:

Open: 50 cents to $1.50 lower. Lean hog futures are taking their turn posting sharp losses Tuesday morning following the volatile and mixed price moves seen Monday. Uniform triple-digit losses are seen in all nearby contracts with December futures holding $1.40 per cwt losses, once again testing the support level of $70 per cwt. A move below this level would likely spark increased momentum through the complex, as traders focus on the inability to hold recent gains and concerns of widespread liquidation developing across the complex. Given the early week losses in cattle trade Monday, limit losses in lean hog futures Tuesday are not totally out of the question. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest liquidated 5,992 positions (222,932). December added 698 positions (91,727) and February slipped 98 positions (45,461). Cash lean index for 10/16 is $78.27, up 0.04. DTN projected slaughter for Tuesday is 488,000 head. Saturday runs are expected at 237,000 head.

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

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