DTN Before The Bell Livestock

GENERAL COMMENTS:

Active early gains have developed in nearby live cattle and feeder cattle futures. The potential to sustain this early support will be important in sparking renewed technical support, while pressure in cash cattle trade and boxed beef markets remains evident. Hog futures have trickled lower as position taking is seen Thursday. Corn is trading higher in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 46 points lower with NASDAQ up 13 points.

LIVE CATTLE:

Open: Steady to 90 cents higher. Traders are quickly shaking off any disappointing news from the weekly export sales report, as follow through buying has quickly developed through the live cattle complex. Nearby contracts appear to be even more focused on the ability to build on recent support levels of $10 per cwt through the near future, although fundamental market direction continues to weaken. The ability to push and hold February futures above $112 per cwt through the end of the week is expected to stimulate underlying market support, but growing uncertainty about beef demand over the coming weeks due to increased covid cases could limit market support. Weekly export sales of beef remained extremely light with only 3,000 metric tons reported as sold last week. Shipments of previous sales remained active with 18,200 mt of beef shipped. Net cancelations in Hong Kong and South Korea added to the dismal weekly export sales numbers. Cash cattle markets are slow to develop once again Thursday morning, although packer interest is expected to improve as more cattle are expected to need to be bought over the next two days. Cash cattle prices are generally $2 to $2.50 per cwt lower than last week in the South and as much as $4 per cwt lower in the North. The tumbling boxed beef prices have continued to add market weakness to the entire cash market. It is expected that additional trade may be confined to the current market range, but outside market moves may further weekend price levels. Open interest added 2,316 positions (282,663). December contracts lost 941 positions (10,010) and February contracts added 567 positions (113,966). DTN projected slaughter for Thursday is 121,000 head.

FEEDER CATTLE:

Open: Steady to $1 higher. Firm gains have quickly moved into all cattle trade with feeder cattle markets leading the upward market shift. Given the recent $4 per cwt tumble in spot month contracts, traders still remain comfortable as prices are well above recent support levels. This could help to drive buyer support back into the market over the near future, even though market fundamentals remain weak. Cash index for 12/4 is $138.28, down 0.90. Open interest Wednesday gained 290 positions (40,119).

LEAN HOGS:

Open: Steady to 30 cents lower. Narrow losses have developed in all lean hog futures trade as initial market moves are focused on adjusting positions following midweek gains. Although continued fundamental concerns remain evident in the pork industry, futures markets will need much more convincing before giving up recent market support and showing further widespread liquidation. The early support in cattle trade is limiting overall market interest Thursday morning, allowing prices to hang onto initial losses. Weekly pork exports posted total export sales last week at 26,500 metric tons. This is slightly disappointing given the potential expectation of firm support though the end of the year. Total shipments are listed at 42,000 metric tons for the week. Mexico (10,400 mt), China (6,300 mt) and Japan (5,500 mt) rounded out the top three pork destinations for the week. The sales to these three countries accounted for 84% of all sales. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest fell 1,658 positions (193,548). December fell 1,487 positions (10,213) and February slipped 663 positions (82,303). Open interest in pork cutout futures fell 2 positions (583). Cash lean index for 12/7 is $65.60, down 0.19. DTN projected slaughter for Thursday is 493,000 head. Saturday runs are expected near 313,000 head.

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

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