DTN Before The Bell Livestock

GENERAL COMMENTS:

Sellers continue to get in line in cattle and hog futures despite initial mixed trade. The focus on eroding fundamental support and technical pressure starting to become more evident is adding further market pressure across the entire livestock market. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 36 points higher with NASDAQ up 23 points.

LIVE CATTLE:

Open: Mixed. Limited buyer support trickled into live cattle futures early Friday morning. These gains were short-lived as continued fundamental and technical pressure continues to develop across the complex. There remains uncertainty as to just how much further nearby markets will fall given the concern that demand growth may stall over the coming weeks and months. Open interest in live cattle futures continues to erode lower, indicating further liquidation is still developing as traders in the live cattle market are either getting out of the market or moving to other more promising markets for the short term. Cash cattle interest remains quiet Thursday morning following light to moderate trade Wednesday and limited trade earlier in the week. Asking prices in the South are now seen at $107 per cwt, and hard to pin down in the North through the morning, but the lower moving cash prices may have established a tone for the week. It is uncertain given the early week trade how many feeders will hold out until after the cattle on feed report. With on feed and placement numbers expected to be larger, the general perception is that the cattle on feed report will carry a bearish tone. Cash trade for the week is generally $2 to $4 per cwt below last week's average, and steady to weak with prices earlier in the week. Open interest slipped 267 positions (268,833). October contracts lost 496 positions (2,772) and December contracts fell 384 positions (107,134). DTN projected slaughter for Thursday is 120,000 head.

FEEDER CATTLE:

Open: Mixed. Narrow price shifts are seen in feeder cattle futures with light pressure seen in nearby contracts while limited buying is starting to redevelop in deferred contract months. The ability to still draw additional trader interest to the feeder cattle market during this recent shift lower in price levels indicates that traders are slowly willing to step back into the complex as they search for a market bottom. But the continued focus on higher feed prices and eroding cash and futures moves in the live cattle trade continues to limit market support at this point. It is likely that feeder cattle futures will be the first of the cattle markets to turn the corner toward higher prices, but it could be a slow process over the next several weeks. Cash index for 10/20 is $138.36, down 0.30. Open interest Wednesday added 684 positions (44,797).

LEAN HOGS:

Open: Mixed. Early trade in lean hog futures Thursday morning is mixed in a very narrow range with prices hovering from 10 cents lower to 30 cents higher as a combination of follow-through selling interest is met with late-week short covering. Traders are expected to show little long-term market direction over the next couple hours. This is likely to keep prices bouncing higher and lower within a moderate price range through the rest of morning, and likely the end of the week. Pork export sales in the weekly report is likely to be viewed neutral to slightly bearish with total new sales listed at 26,800 metric tons. China will be viewed as extremely disappointing given only 1,800 mt was sold to the country, although shipments of previously sold pork product was seen at 12,500 mt. Mexico led the list of buyers last week with nearly half of all exports going to Mexico. Further price pressure may develop through the day Thursday as traders work through the disappointing export sales report. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest added 248 positions (222,369). December fell 578 positions (90,822) and February gained 732 positions (46,168). Cash lean index for 10/20 is $78.69, up 0.07. DTN projected slaughter for Thursday is 490,000 head. Saturday runs are expected at 238,000 head.

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

(c) Copyright 2020 DTN, LLC. All rights reserved.