DTN Before The Bell-Livestock

GENERAL COMMENTS

Active pressure is quickly moving into most nearby lean hog contracts with April futures able to hold narrow gains, while triple-digit pressure is developing. A momentum shift appears to be developing in hog trade, creating additional liquidation. Cattle markets remain mixed in a narrow range, which is expected to hold most of the morning. Corn markets are lower in light early trade. Stock markets are lower. Dow Jones is 205 points lower with Nasdaq down 19 points.

LIVE CATTLE:

Open: Mixed. Light to moderate buying activity is slowly but steadily moving into nearby contracts, although these gains are being offset by pressure in deferred trade. Focus Tuesday morning is placed on seasonal demand, although traders seem reluctant to aggressively move into the market past the summer based on potential supply levels that could limit further growth. Live cattle trade remains well defined within the wide trading range seen through most of the spring. These boundaries could continue to hold through most of the summer. Cash cattle activity remains quiet early Tuesday morning with asking prices and bids still unavailable. It is likely that bids will not develop until midweek or later. Most of the trade is expected to be pushed off until late in the week, although Wednesday trade the previous two weeks could spark some early market interest. Open interest Monday added 1,551 positions (442,575). Spot month April contracts lost 3,422 positions (24,379) and June contracts added 562 positions (199,900). DTN projected slaughter for Tuesday is 117,000 head.

FEEDER CATTLE:

Open: Mixed. Narrow trading ranges are seen in all cattle futures with feeder cattle markets hovering from 20 cents lower to 15 cents higher in early morning trade. The focus continues to be placed on the ability to draw additional buyer interest into live cattle trade. The softness in grain trade is limiting overall activity in the feeder cattle futures, but still not sparking enough interest to bring buyers back to the complex due to lower production costs. Narrow trading ranges are expected to continue through most of the morning as traders look for direction from live cattle prices and outside market direction. Cash index for 4/5 is $143.30 down $0.79. Open interest Monday added 339 positions (49,244).

LEAN HOGS:

Open: Steady to $2 lower. Firm early losses have quickly and aggressively moved into nearby futures trade. The continued disconnect between spot market moves and the rest of the futures trade over the last several days is starting to erode some of the optimism that has quickly spread through the complex. Although May contracts remain so extremely lightly traded, this contract is leading the charge lower early Tuesday. But the fact that summer contracts are holding triple-digit losses is causing more concern that what started as a market correction could quickly become expanded liquidation. Trade volume remains light at this point, but the overall tone of the market still remains firm, despite the lower prices. Cash hog trade is called 50 cents lower to $1.00 higher. Most bids are expected steady to weak. Open interest added 2,814 positions (287,740). April fell 991 positions (14,435) and June fell 314 positions (82,103). Cash lean index for 4/5 is $78.68 up $0.15. DTN projected slaughter for Tuesday is 477,000 head. Saturday runs are expected at 52,000 head.

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

(BAS)

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