DTN Before The Bell-Livestock

GENERAL COMMENTS

Livestock futures are mixed in a lightly traded narrow range Wednesday morning. The aggressive liquidation seen through the last few days is creating a combination of follow-through selling and short covering in all markets as traders try to find a sense of stability through the market. Corn markets are lower in light early trade. Stock markets are higher. Dow Jones is 7 points higher with Nasdaq up 5 points.

LIVE CATTLE:

Open: Mixed. Limited gains are seen in nearby live cattle trade as traders try to right the ship following an aggressive market slide over the last few weeks. There is expected to be some additional liquidation over the next few days as open interest continues to quickly erode with noncommercial and commercial traders quickly exiting the complex. Fundamental demand has not significantly changed over the last several weeks, with traders still focusing on moderate to strong beef demand from domestic and export markets. But traders have quickly and aggressively started to move out of all livestock markets, as they reinvest in other commodity and financial markets during late April and early May. This is likely to add even more volatility to the complex until additional strong buying moves back into the oversold live cattle complex. Cash cattle activity remains generally sluggish Wednesday morning with just a few bids redeveloping in the North. Following moderate trade in the South Tuesday at $120 per cwt and limited activity in Nebraska at $195 to $196 dressed, the tone of the market is likely to be set. Business in the South may essentially be done, although additional northern trade is expected before the end of the week. Open interest Tuesday liquidated 8,717 positions (383,388). Spot month June contracts lost 10,119 positions (126,602) and August contracts added 1,057 positions (112,807). DTN projected slaughter for Wednesday is 120,000 head.

FEEDER CATTLE:

Open: Steady to $1 higher. Limited buyer support is moving back into the complex early Wednesday morning. The overall support through the complex continues to add increased underlying support to the market, and may spark some additional price support over the next couple of days. The entire cattle complex is extremely oversold with price moves Tuesday moving nearby contracts off contract lows. The ability to sustain this support through the end of the week will go a long ways in redeveloping buyer interest through the entire complex. Cash index for 4/30 is $144.63 down $0.03. Open interest Tuesday fell 856 positions (48,573).

LEAN HOGS:

Open: Mixed. Limited market movement is seen through the entire lean hog complex with prices hovering in a mixed range from 22 cents lower to 25 cents higher. The strong liquidation that continues to develop as traders exit the market is still leaving the complex extremely oversold based on expectations of longer term demand growth. The overall uncertainty surrounding trade talks with China and not knowing how swine fever will impact overall weekly or monthly export sales to China is likely to add even more volatility to the complex. There may be some additional underlying support moving into nearby contracts, although late-year market shifts have continued to be the main driver of lean hog market prices over the last few weeks. Cash hog trade is called steady to $1 lower with most bids steady to weak. Open interest liquidated 4,716 positions (308,714). June slipped 9,341 positions (65,915) and July gained 2,020 positions (51,504). Cash lean index for 4/29 is $83.27 down $0.19. DTN projected slaughter for Wednesday is 473,000 head. Saturday runs are expected near 12,000 head.

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

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