DTN Before The Bell Livestock

Short-Covering Develops Early Monday

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

GENERAL COMMENTS:

Livestock futures are mixed in light trade as buyers slowly but steadily trickled into cattle markets following aggressive losses late last week. The concern that the moves lower would add further technical pressure in all futures trade, combined with growing fundamental uncertainty, could leave markets vulnerable to further pressure during early week trade. Corn futures are higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 295 points higher with NASDAQ up 48 points.

LIVE CATTLE:

Open: Mixed. Narrow price shifts early Monday morning found initial traders focusing on adjusting positions following sharp, triple-digit losses late last week. The weaker tone was established Friday, but the ability of buyers to move into all nearby contracts in the first few minutes of trade Monday morning could curb further price pressure. Front-month December contracts appear to be finding renewed support near $110 per cwt, which could help establish a moderate to strong sideways market trend that may contain the market through the upcoming days and weeks. Traders will closely monitor the direction of boxed beef trade in morning and afternoon reports to get an indication if beef values have peaked, or if underlying fundamental support is still developing in wholesale beef prices. Cash cattle activity remains undeveloped Monday morning with showlist distribution and inventory taking the main order of business through most of the day. Elevated cash prices last week will help spark renewed optimism in feedlot managers as they focus on extending the rally during the week. Cattle are not expected to be priced until Tuesday or Wednesday, with bids unlikely until the last half of the week. Open interest added 1,566 positions (275,402). December contracts lost 4,620 positions (43,032) and February contracts added 3,084 positions (103,661). DTN projected slaughter for Monday is 119,000 head.

FEEDER CATTLE:

Open: Mixed. Limited buyer interest stepping back into the feeder cattle complex caused the market to focus on potential price stability following aggressive triple-digit losses Friday. Nearby contracts started mixed, but the first couple of minutes of trade proved that buyer interest is slowly developing in order to cover short positions. Building off recent losses and sparking buyer interest back into the complex may be a slow and painful process, but prices may be able to build off current levels through the Thanksgiving holiday. The expectation of holding current price support levels around $137.50 per cwt in nearby contracts could spark renewed market interest over the next few weeks. Cash index for 11/12 is $137.35, up 0.65. Open interest Friday fell 173 positions (35,813).

LEAN HOGS:

Open: Mixed. Narrow price swings are seen in lean hog futures as traders focus on the overall lack of underlying support following triple-digit losses Friday. Spot December was the only contract to move higher at opening bell, as traders covered short positions. The rest of the market remains either untraded or moderately lower following concerns that further pressure will develop in pork cutout values early in the week. Nearby contracts remain near support levels of $65 per cwt, but the current supply of market-ready hogs available to packers will create uncertainty surrounding further support. Although overall, pork demand is holding extremely well, there are growing concerns of short-term impacts as COVID-19 numbers continue to rise. This not only puts the focus on pork demand, but the ability to maintain adequate labor levels in order to sustain current processing speeds at packing plants. Cash hog bids are expected $1 lower to $1 higher, with most bids steady to 50 cents higher. Open interest fell 481 positions (207,375). December fell 2,579 positions (37,655) and February gained 1,282 positions (75,709). Cash lean index for 11/12 is $70.84, down 0.48. DTN projected slaughter for Monday is 489,000 head.

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

Editor's Note: See DTN Livestock Analyst ShayLe Stewart's complete 2021 market outlook live by attending the DTN Ag Summit, Dec. 7-9. This year's event is virtual, and as a DTN subscriber you can attend for FREE. Our premier farmer and rancher event features markets updates from ShayLe, DTN Lead Analyst Todd Hultman and a weather outlook by Senior Ag Meteorologist Bryce Anderson. Other speakers include: U.S. Ambassador Kip Tom; Ken Eriksen and Paul Hughes of IHS Markit; Microsoft Chief Scientist Ranveer Chandra; personal development speakers David Horsager and Jon Gordon; farmers Reid and Heather Thompson; farm blogger Meredith Bernard, and many more.

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Rick Kment