DTN Before The Bell Livestock

GENERAL COMMENTS:

Light trade activity is seen in all livestock markets Thursday morning with early pressure in live cattle and lean hog futures. Although traders will continue to focus on the direction of meat values and end-of-week shifts in cattle and hog futures, most traders seem to be closely following the results of the upcoming USDA reports and the impact on the grain market. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 94 points higher with NASDAQ up 37 points.

LIVE CATTLE:

Open: Steady to 50 cents Lower. Narrow losses are slowly backing away from the positive price shifts seen midweek as traders try to assess just how much downward market pressure eroding boxed beef values will have to the entire complex. Trade remains limited Thursday morning, but as expected February futures the focus of the complex, currently 50 cents lower. Trade is expected to remain sluggish through much of the morning with more focus being placed on outside markets and the impact of the USDA and WASDE reports which will be released later in the morning. Export sales and shipments improved from the lackluster total seen last week with a total of 13,700 metric tons reported sold and 16,600 metric tons shipped. Japan was the largest purchaser of beef last week, with 7,200 mt of beef sold to the country, accounting for over half of all weekly export sales. Cash cattle markets remain quiet early Thursday morning with bids undeveloped following light trade Wednesday. Trade seen midweek seems to be scattered within a $2 per cwt trading range in all areas, with $110 to $112 developing for live trade, while dressed trade was reported from $172 to $174 per cwt. This is generally $1 lower to $1 per cwt higher from last week's average, and will be very interesting where the rest of the market falls through the end of the week. In general regional packers are reported paying at the top end of the range, while major packers are coming in near the bottom end of the $2 price range. The weird thing is that there is very little activity reported steady with last week at this point. Feeders are still pricing cattle at $112 to $113 in the South, and $175 to $176 dressed basis in the North. Open interest added 662 positions (277,202). December contracts lost 1,388 positions (19,020) and February contracts added 863 positions (112,256). DTN projected slaughter for Thursday is 121,000 head.

FEEDER CATTLE:

Open: Mixed. Feeder cattle futures continue to hover within a very narrow but mixed trading range early Thursday morning. The focus on price pressure in live cattle trade combined with renewed gains in corn futures has led to initial buyers slowly but steadily backing away from the complex. There remains uncertainty as to just how much additional price shifts will be seen during the morning as traders continue to look for longer term direction. The recent market gains have moved nearby feeder cattle futures to short term highs, but the uncertainty of feed prices will continue to be the biggest challenge to increased feeder cattle market moves in the near future. Cash index for 12/1 is $139.87, down 0.43. Open interest Wednesday added 699 positions (39,354).

LEAN HOGS:

Open: Steady to 20 cents Lower. Light pressure is slowly but steadily developing early Thursday morning as traders focus on follow through selling pressure driving lean hog futures lower. The increase in pork cutout values seen Wednesday is giving very little support to the complex, although at this point, most nearby contracts are limiting losses to 10 to 15 cents per cwt. The recent price support in December and February futures is likely to keep markets from tumbling aggressively lower in the near future, but lack of long-term direction could keep prices hovering within a narrow to moderate range. Export sales and shipments of pork during the Thanksgiving week posted sales totals of 31,300 metric tons with shipments of 34,100 metric tons. Improvements in China sales were seen from the previous week with 7,400 mt sold to China. Mexico was the largest customer during the week with 12,900 mt sold to our southern neighbor, while 11,500 mt were shipped to the country. It is still too early to determine if China exports are seeing long-term changes, but something to closely watch over the next few weeks. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest fell 484 positions (200,436). December fell 1,599 positions (16,614) and February gained 752 positions (84,333). Cash lean index for 12/1 is $66.71, up 0.04. DTN projected slaughter for Thursday is 491,000 head. Saturday runs are expected near 307,000 head.

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

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