DTN Before The Bell-Livestock

Sharp Losses Redevelop in All Livestock Trade

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

Strong pressure has redeveloped in hog and cattle markets. This overall lack of support in the market has posted triple-digit losses during the first few minutes in most contracts. Concern about overall demand for beef and pork products is the main driver of the recent market tumble. Corn prices are lower in light trade. Stock markets are lower, Dow Jones is 420 points lower while Nasdaq is down 88 points.

LIVE CATTLE:

Open: 80 cents to $2 lower. Moderate to strong pressure is quickly developing across the live cattle complex. This is adding uncertainty to the entire market as traders continue to focus on the potential to draw increased support back into the market. Traders are looking for the potential of additional market pressure as additional products are being added to potential tariffs over the long term. The concern is not only based on talks with China, but the potential of what could happen with other countries if this back and forth continues to build in the coming weeks and months. Sharp losses are expected to be seen through most of the session with little to no help coming from outside markets. Cash cattle interest remains light early Wednesday morning. Light trade was seen in most areas Tuesday as strong basis levels given the erosion of futures trade sparked the interest to unload cattle. Most trade was $3 to $5 per cwt lower than last week. This could be the general trend for the week, although more cattle are expected to trade over the near future. Open interest Tuesday gained 506 positions (356,820). Spot month April contracts lost 3,733 positions (32,102) and June contracts gained 1,135 positions (161,263). DTN projected slaughter for Wednesday is 118,000 head.

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FEEDER CATTLE:

Open: $1 to $2 lower. Triple-digit losses have continued to develop through the feeder cattle complex early Wednesday morning. The break below $130 per cwt in nearby contracts is adding even more volatility to the entire cattle complex. The most recent news shaking the cattle complex is the newest list of proposed tariff items listed by China. This list includes many more products including beef. Although at this point there is so much uncertainty as both sides are jockeying for position in what could be a drawn out trade war if negotiations break down, these potentials make all markets uneasy. Cash index for 4/2 is listed at $134.94 down 0.12. Open interest Tuesday fell 1,650 positions (54,115).

LEAN HOGS:

Open: Steady to $1 Lower. Additional pressure is quickly moving into the lean hog complex. This is adding more uncertainty to the already weak complex. Prices in nearby contracts are holding initial losses of $1 per cwt as the focus on short and long term demand issues and how export markets will be affected by the recent Chinese tariffs. The current strong supply of hogs available to packers at this point is adding to the market uncertainty. Even though June futures continue to hold a $20 per cwt premium on April futures, all contracts have traded in a similar trend over the last month. Cash hog trade Wednesday is expected $1 to $1.50 lower. Most bids are $1 per cwt lower. Open interest Tuesday added 4,026 positions (239,118). Spot month April fell 1,305 in positions (20,135) and June added 1,933 positions (99,520). Cash lean index for 4/2 is $56.00, down 0.72. DTN projected slaughter for Wednesday is expected to be 465,000 head. Saturday runs are currently estimated at 156,000 head.

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

(SK)

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Rick Kment