DTN Before The Bell-Livestock

GENERAL COMMENTS

Strong losses have quickly developed in all livestock trade as triple-digit pressure is seen in most cattle trade and spot month lean hog futures. This lack of support could quickly add additional pressure through the rest of the week. Corn markets are lower in light early trade. Stock markets are lower, Dow Jones is 157 points lower while Nasdaq is down 84 points.

LIVE CATTLE:

Open: $1 to $2 lower. Sharp losses have quickly and aggressively developed through the entire live cattle complex with nearby contracts leading the market lower. Front month December contracts is holding strong losses near $2 per cwt during early trade. Active contract liquidation has been seen in the complex through the week, especially spot month December contracts. December contracts have liquidated over 20,000 positions in just the last two trading sessions, as traders quickly exit the market with only moderate interest showing in reinvesting in positions at this point. This could continue to add significant weakness to the entire complex as commercial traders appear to be backing away from the complex. Cash cattle activity remains sluggish Friday morning with just a few bids developing through Nebraska at $178 to $180 per cwt dressed basis. This is still a long ways from current asking prices, and is likely to spark additional interest through the day. It may be late afternoon until cash trade develops in either area. Asking prices are holding firm at $118 live and $185 dressed. Open interest Thursday tumbled 5,705 positions (340,026). Spot month December contracts lost 10,015 positions (92,610) and February contracts added 273 positions (98,911). DTN projected slaughter for Friday is 117,000 head.

FEEDER CATTLE:

Open: 65 cents to $1.50 lower. Strong early morning pressure quickly developed in all cattle trade Friday morning with feeder cattle futures holding moderate to strong pressure through most of the complex. January and February contracts are showing the most significant market weakness with prices $1.50 per cwt lower in early trade. But the overall lack of support in live cattle trade and direction of cash cattle markets through the end of the week could add additional direction to the entire complex. Cash index for 11/07 is listed at $152.23, down 0.65. Open interest Thursday fell 363 positions (49,410).

LEAN HOGS:

Open: 50 cents to $1.25 lower. Firm pressure has quickly moved into nearby lean hog futures with triple-digit losses seen in front month December contracts. The overall lack of support at the end of the week is adding to the pressure already seen during the last few days. With very limited additional direction seen in pork fundamentals through the week, traders continue to adjust prices lower. Even though pressure is developing, the market still remains well entrenched in the sideways market trend, and could continue to bounce significantly higher or lower without making any technical market indications. This lack of longer term direction continues to be challenging from a fundamental perspective as little is changing in overall product supply or demand. Cash hog trade Friday is expected $1 to $1.50 lower. Most bids are seen $1 per cwt lower. Open interest added 5,851 positions (226,901). Spot month December slipped 2,259 positions (70,681) and February added 6,528 positions (60,081). Cash lean index for 11/7 is $63.38 down 0.34. DTN projected slaughter for Friday is at 472,000 head. Saturday runs are expected at 215,000 head.

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

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