DTN Before The Bell Livestock

GENERAL COMMENTS:

Hog futures have bounced firmly higher Friday morning, but this is still not offsetting the sting realized after markets moved to limit losses Thursday. Light trade is expected in all markets with position adjustments likely to be the agenda for most traders. Corn is trading higher in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 6 points lower with NASDAQ down 47 points.

LIVE CATTLE:

Open: Mixed. Initial price pressure was short-lived, giving way to moderate price support in nearby contracts. This ability to hold early morning gains through the rest of the complex could help to spark renewed interest during late October. Traders will continue to focus on the afternoon cattle on feed report. This report is the premier cattle report of the month and the best indication of overall inventory levels and supplies moving into feedlots. Although higher placements and inventory levels are expected, report numbers above early estimates will likely be viewed significantly bearish to the market early next week. Cash prices are expected to end up $2 to $4 per cwt below last week's average, potentially posting the largest downward move so far this fall. Open interest added 1,486 positions (270,330). October contracts lost 600 positions (2,172) and December contracts added 123 positions (107,268). DTN projected slaughter for Friday is 116,000 head.

FEEDER CATTLE:

Open: Mixed. Prices are mixed in narrow single-digit moves in most nearby contracts. The focus on the afternoon cattle on feed report is expected to be the main driver of the market most of the session with traders not only adjusting positions based on pre-report estimates, but many traders are focusing on the potential that the report may break away from general belief of overall supply levels seen in feedlots through the fall. The continued pressure in cash feeder cattle sales over the last couple of weeks is also putting more pressure on the complex in general. Cash index for 10/21 is $135.53, down 2.83. Open interest Thursday added 845 positions (45,642).

LEAN HOGS:

Open: Mixed. Traders are focused on market correction following limit losses Thursday in spot-month contracts. Opening prices shifted lower, but light to moderate buyer support is focused on covering short positions. The fact that lean hog trade still has expanded limits available through the entire session, with moves of $4.50 per cwt possible will cast a shadow over the entire market through the end of the week. Given the aggressive hog market losses over the last few days, the light to moderate gains seen Friday morning may not create much confidence moving forward. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids $1 lower. Open interest liquidated 3,735 positions (218,445). December fell 3,015 positions (87,618) and February gained 94 positions (46,262). Cash lean index for 10/21 is $78.60, down 0.09. DTN projected slaughter for Friday is 486,000 head. Saturday runs are expected at 238,000 head.

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

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