DTN Before The Bell Livestock

GENERAL COMMENTS:

Initial gains seen in cattle futures have eased Monday morning as traders are adjusting positions following last week's market rally. The inability for beef values to stabilize will continue to gain attention as traders look for demand support through the end of the year. Hog futures are holding strong gains, offsetting overly aggressive market losses last Friday. Corn is trading mixed in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 258 points higher with NASDAQ up 141 points.

LIVE CATTLE:

Open: Mixed. Spillover buying quickly moved into live cattle trade at opening bell Monday. But prices soon adjusted into a narrowly mixed trading range with limited underlying support seen through the entire complex. There continues to be increased pressure on nearby futures based on weakness in beef values. Until boxed beef prices start to stabilize and move higher, consistent support in nearby live cattle futures is expected to remain choppy. Firm long-term gains seem to be holding as increased hope is being placed on the idea that vaccine approvals will help to significantly reduce covid cases, although it still may be months from now before market demand is seen. Cash cattle activity is slow to develop Monday morning following disappointing lower cash cattle trade last week. All parties will closely be watching the morning summaries to determine weekly average prices last week. The varied trade which took place over four days could moderately change market averages depending on when cattle were sold in each region. Bids and asking prices are still unavailable with show list distribution and inventory taking the main order Monday. This will be the last full week of trade and cash market activity of 2020, leaving some speculation of needed market interest during the next three weeks. Open interest added 1,202 positions (285,527). December contracts lost 969 positions (8,269) and February contracts added 423 positions (115,439). DTN projected slaughter for Monday is 120,000 head.

FEEDER CATTLE:

Open: Mixed. Underlying follow through buyer support is quickly redeveloping Monday morning, especially in late spring and summer contract months. The focus on recent live cattle gains in futures trade is helping to pull market emphasis away from cash price direction and beef values, with more focus being placed on longer-term beef demand. Outside markets are becoming more energized by the weekend approval of Pfizer's COVID-19 vaccine. This has the potential to not only change the direction of the overall economy, but could set a course of renewed beef demand in domestic and export markets. Cash index for 12/10 is $136.66, down $0.45. Open interest Friday gained 833 positions (41,458).

LEAN HOGS:

Open: Steady to $1 higher. Lean hog futures are the clear winner early Monday morning, although trade volume remains limited. Traders are reacting to the aggressive triple digit losses seen Friday, which countered moves in pork values and the rest of the livestock market. As buyers slowly but steadily move back into the market, prices have started to establish firm support levels near $63.25 per cwt in nearby contracts. The ability to hold these levels through the week could significantly change the direction of trade during the end of the year. Strong underlying processing schedules are expected this week, although an expected revision from Saturday's plant output is likely to adjust plans for this Saturday's slaughter rates. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest fell 2,125 positions (190,590). December fell 929 positions (8,623) and February slipped 432 positions (81,557). Open interest in pork cutout futures gained 23 positions (600). Cash lean index for 12/10 is $65.35, down 0.25. DTN projected slaughter for Monday is 493,000 head.

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

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