DTN Before The Bell-Livestock

Livestock Trade Weakens Early Tuesday

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

Livestock futures remain mixed to mostly lower as traders continue to remain extremely cautious given the firm early-week support in outside markets and expectations that the potential for increased trade with China may develop. There is expected to be some moderate widespread pressure in most markets as traders try to grasp just how market direction will develop in the coming weeks and months. Corn markets are higher in light early trade. Stock markets are lower, Dow Jones is 77 points lower Nasdaq is down 27 points.

LIVE CATTLE:

Open: Mixed. Limited activity is seen through the live cattle complex with prices mixed in a single-digit range. The overall lack of direction in the complex continues to keep front-month December contracts slightly higher as well as deferred futures. Most of the pressure seen in cattle trade is focused on the pullback in the feeder cattle market through the last two sessions. Cash cattle activity remains at a standstill with bids and asking prices yet to become well established. Traders are looking for additional direction going through the week, but active trade is not expected until the last half of the week. Open interest Monday fell 2,615 positions (336,872). Spot month December contracts lost 2,562 positions (27,364) and February contracts gained 434 positions (137,113). DTN projected slaughter for Tuesday is 120,000 head.

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FEEDER CATTLE:

Open: 20 to 70 cents lower. Firm pressure is seen in all feeder cattle trade with the focus on the increased grain and feed prices affecting overall production costs. This has led nearby contracts lower with increased pressure likely to develop through the morning. Narrow losses are seen in deferred trade as these contract through the middle and end of 2019 are not as dependent on overall production costs as January futures. Traders in deferred contracts are also expecting that additional time will give more clarity as to how markets will move through the first half of 2019 given the new direction in China trade. Cash index for 11/30 is listed at $147.92, up $0.79. Open interest Monday gained 57 positions (49,817).

LEAN HOGS:

Open: Mixed. Initial market moves are mixed to mostly lower with single-digit price shifts seen in all deferred contracts. Nearby trade is currently steady to 50 cents lower with the most significant pressure seen in lightly traded December contracts. The underlying pressure that developed across the complex Monday is focusing on spot month contracts as questions about just how much support the livestock market will get from any deals from increased access to China trade. It is heavily suggested that pork will benefit from any increased access to Chinese markets, but as of yet, it is hard to determine what will be included, and when and how much product this could impact. Until then, traders seem to become increasingly cautious, and with good reason. Cash hog trade Tuesday is steady to $1.00 lower. Most bids are seen steady to 50 cents lower. Open interest fell 3,347 positions (215,842). Spot month December fell 1,494 positions (24,386) and February lost 334 positions (77,499). Cash lean index for 11/30 is $56.36 down 0.06. DTN projected slaughter for Tuesday is at 477,000 head. Saturday runs are expected at 220,000 head.

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

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Rick Kment