DTN Before The Bell-Livestock

GENERAL COMMENTS

Narrowly mixed trade is encompassing the livestock complex Wednesday morning. The potential to spark underlying support in lean hog trade could help to not only stabilize the weak market structure, but also add some needed confidence through the complex. Cattle markets are covering short positions seen early in the week, but volume remains extremely sluggish. Corn markets are higher in light early trade. Stock markets are higher. Dow Jones is 49 points higher with Nasdaq up 27 points.

LIVE CATTLE:

Open: Mixed. Live cattle trade is hovering in a narrowly mixed trade early Wednesday morning with the focus on increased volume moving into the complex after the first of the month. Although overall beef demand is expected to continue to remain firm through the spring and summer, but given the aggressive market tumble over the last two weeks, it is expected that markets may find stability at the lower end of the trading range. With April contracts now in the history books, June futures are taking over as front-month futures with prices near $114 per cwt. The current discount to cash market prices may help to spark some underlying support over the near future. But this is likely to create a more negative impact on cash markets than push futures trade higher. Cash cattle interest is expected to improve slightly through the day with additional bids around $122 to $123 expected to be seen in Kansas and Texas. At this point, activity in the North appears to still remain sluggish as bids and asking prices are not fully defined. Following the limited trade in the South Tuesday before the end of April, it is uncertain just how much additional activity will develop over the next couple of days. Open interest Tuesday liquidated 2,588 positions (417,852). Spot month April contracts lost 277 positions (0) and June contracts slipped 4,446 positions (159,787). DTN projected slaughter for Wednesday is 121,000 head.

FEEDER CATTLE:

Open: Mixed. Limited gains are slowly moving into nearby feeder cattle trade Wednesday morning Early support is more focused on short covering following triple digit losses at the end of April, than any change in market direction. The ability to hold and build on early market support could help to bring about increased underlying support through the entire complex. But technical pressure over the last week has created growing uncertainty through the entire cattle complex and concerns about supply growth through the remainder of the spring has many feeder cattle traders looking for increased protection. Cash index for 4/29 is $144.66 down $0.75. Open interest Tuesday fell 31 positions (50,025).

LEAN HOGS:

Open: Mixed. Narrow trading ranges are seen on May 1 as traders are slowly backing away from the strong downhill slide seen in lean hog trade through the last half of April. The overall tone of the market still remains generally bearish with overall pressure focusing on long-term direction and the ability for late 2019 and 2020 contracts to regain support. There is growing uncertainty about if an when a trade agreement with China will develop, and how this will impact overall pork trade as well as price levels. The overall issues with swine fever in China continues to focus on building short and long term demand. But with prices moving aggressively higher through the spring, it is uncertain how much of the total buying has already been factored into the complex. The ability to hold nearby gains through the entire session would go a long ways in helping to spark renewed interest in noncommercial trades who have been quickly backing away from the complex. Cash hog trade is called steady to $1 lower with most bids steady to weak. Open interest fell 355 positions (317,740). June slipped 76 positions (81,999) and July gained 787 positions (45,736). Cash lean index for 4/29 is $83.27 down $0.19. DTN projected slaughter for Wednesday is 475,000 head. Saturday runs are expected near 36,000 head.

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

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