DTN Before The Bell Livestock

Midweek Rebound Creates Market Optimism

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

GENERAL COMMENTS:

Firm gains have developed early in the session as traders adjust positions. It is uncertain if the renewed support will be able to hold given the bearish underlying tone in cattle and hog markets. This could lead to further volatility during the morning, similar to the wide market swings seen over the past couple of days. 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. Firm buyer support is seen in live cattle futures at opening bell. The concern in the live cattle futures is if initial gains will be able to hold as it is still questionable how deep buy orders are and if this will spark further market support midweek. This could lead to additional price shifts and wide market volatility over the coming days. Cash cattle markets are quiet with limited interest seen on both sides. The weaker cash trade early in the week has set the tone for a lower moving market, although packers still need to gain access to additional market ready cattle in order to fuel aggressive procurement levels over the next few weeks. 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.

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FEEDER CATTLE:

Open: Mixed. Feeder cattle futures are holding strong early gains at opening bell, especially in nearby contracts. But the focus on concerns that follow through buyer interest may be limited through the last half of the week could minimize upward market potential. Softness in feeder cattle fundamentals as cash values continue to erode across the country could add even more weakness to the entire complex. Cash index for 10/19 is $138.66, down 1.40. Open interest Tuesday added 132 positions (43,681).

LEAN HOGS:

Open: Steady to $2 higher. Active buyer support quickly moved back into spot month December contracts as traders quickly back away from Tuesday's losses. The underlying pressure in the complex continues to add market pressure weakness to the entire complex. The ability to hold early gains will be essential in building off of new price support levels, although growing uncertainty about pork values in the coming days could cause added volatility through the entire complex. 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 10/19 is $78.62, up 0.35. DTN projected slaughter for Wednesday is 491,000 head. Saturday runs are expected at 252,000 head.

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

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Rick Kment