DTN Before The Bell Livestock

Narrow Price Shifts Seen Due to Sluggish Trade

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

GENERAL COMMENTS:

This week is shaping up to be a typical holiday week, with very limited trade activity and little fundamental or technical market direction detected. This could allow for moderate price shifts to develop in the coming hours due to light trader interest. Corn is trading higher in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 186 points higher with NASDAQ down 32 points.

LIVE CATTLE:

Open: Steady to 20 cents lower. Cattle futures remain sluggish early Wednesday morning with traders seemingly content with Tuesday's losses and may start to regain market support through the end of the week. With cash cattle trade still to develop, and the potential to drive additional price support to the boxed beef market, nearby and deferred futures are looking to build on support levels seen early in the week. Even with gains developing later in the day, limited market volume may keep price moves narrow, as many traders seem to have already adjusted positions for the holidays. Beef exports last week remained dismal, but is unlikely to have a significant impact on price moves Wednesday morning due to limited interest and end of the year export sales adjustments. Total beef export sales were reported at 6,000 metric tons, with total shipments at 13,500 metric tons. Japan was the largest buyer last week with 2,000 metric tons. Beef in cold storage increased from last month and last year with total beef inventory inching 2% over October levels, but jumping 7% above year ago levels. The continued drag on food service demand continues to limit overall movement of beef through the segment, while still large carcass weights of cattle and active slaughter rates through the last quarter of 2020 is keeping supplies elevated. Cash cattle markets are still quiet, although feeders continue to hold onto elevated asking prices and it is uncertain if many feeders will hold cattle into next week instead of giving in to lower bids. It is expected that both sides would like to wrap up business today, although the limited interest so far this week could cause packers to return Christmas Eve to gain access to needed cattle supplies. Open interest added 458 positions (287,286). December contracts lost 591 positions (2,396) and February contracts slipped 671 positions (112,312). DTN projected slaughter for Wednesday is 116,000 head.

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FEEDER CATTLE:

Open: Steady to 60 cents lower. Follow-through pressure has developed in --lightly traded feeder cattle markets Wednesday morning. The underlying weakness in the complex is a combination of firm early morning gains in grain markets, while live cattle futures have been unable to regain secure footing in front of the Christmas holiday. Nearby feeder cattle contracts are likely to hover 40 to 50 cents lower, although limited losses in deferred contracts could help to bring some late day stability to the complex. Cash index for 12/21 is $139.74, up 0.18. Open interest Tuesday added 158 positions (45,377).

LEAN HOGS:

Open: Steady to 30 cents lower. Narrow losses have trickled into the lean hog complex early Wednesday morning. The disappointing weekly export sales report did no favors to the market, although at this point, the complex seems to be just coasting into the Christmas holiday. This is likely to leave prices mixed with very limited volume not only the rest of the day, but also the holiday shortened trading schedule Thursday. Pork export sales released early this week due to Government offices closed Christmas Eve were disappointing to say the least. Although total export sales were listed at 16,300 metric tons, the increased number of cancelations in late December is starting to take its toll. Five countries posted negative sales numbers based on cancelations with China leading the list with a 6,100 reduction in sales on the report. South Korea also reduced sales of 1,800 metric tons. Without the aggressive buyer support from Mexico continuing, with 17,000 metric tons reported last week, the overall export sales would be even more dismal. Shipments remained strong with a total of 40,500 metric tons of pork shipped last week. Pork in cold storage decreased in November, with total pork falling 7% from October levels, and slipping 28% from year ago levels. The significant drawdown in pork bellies focused on year over year decreases of 58%, although belly inventory grew 21% from October levels. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest added 1,773 positions (183,938). February fell 142 positions (78,947) and April added 750 positions (42,138). Open interest in pork cutout futures added 29 positions (670). Cash lean index for 12/21 is $62.04, down 0.51. DTN projected slaughter for Wednesday is 465,000 head. Saturday runs are expected at 67,000 head.

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

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Rick Kment