DTN Before The Bell-Livestock

GENERAL COMMENTS

Mixed trade is slowly developing early Friday morning with very limited trade volume moving into cattle and hog futures. The overall lack of support through the complex after Thursday's shift higher seems to be limiting the upside market moves at the end of the week. Corn markets are lower in light early trade. Stock markets are lower. Dow Jones is 143 points lower with Nasdaq down 50 points.

LIVE CATTLE:

Open: Mixed. Narrow trading ranges have continued to develop through the entire complex with prices hovering from 15 cents lower to 10 cents higher. The overall lack of movement in the market is expected to create some needed stability, but without increased buyer support moving into the complex over the next few days, it is going to be hard to spark longer-term price support. There is growing interest through the entire complex with traders focusing more and more on August contracts as open interest continues to roll out of spot June trade and into the August futures. This may help to solidify additional late-day gains, but the underlying weakness in cash and beef values may limit upside market potential over the short-term. Cash cattle markets appear to be done for the week with bids undeveloped Friday morning. The move lower in all areas with trade on Tuesday and Wednesday is causing both sides to reassess further market direction and the potential for earlier week trade to redevelop next week. Open interest Thursday liquidated 1,077 positions (379,613). Spot month June contracts lost 7,058 positions (110,594) and August contracts added 3,928 positions (120,752). DTN projected slaughter for Friday is 121,000 head.

FEEDER CATTLE:

Open: Mixed. Limited activity is seen early Friday morning, although the overall tone of the market is starting to firm following the late-week bounce in prices started Thursday afternoon. Narrow trading ranges are seen as traders seem to be cautiously focusing on outside market direction with overall lack of support through the entire cattle complex at the end of the week. Cash index for 5/8 is $135.83 down $0.70. Open interest Thursday added 764 positions (49,106).

LEAN HOGS:

Open: Steady to 60 cents Lower. The lack of new information and lack of developments in Thursday's trade talks seem to have eroded a portion of the late day buying Thursday. The market remains extremely weak with traders focusing on increased underlying pressure through the entire complex over the last several weeks. Narrow losses seen in nearby contracts is still leaving open the door for follow-through late week short covering with overall volume expected to remain limited through the rest of the trading session. Traders seem to be trying to establish a new trading range at the lower end of current price levels, which could spark renewed buyer support through the complex. Even with uncertainty in the China trade talks, the expectation that China will still need to supplement pork supplies through the end of the year due to the impact of swine fever in the country. This should limit further downside to the market. It is important to remember that current lean hog futures are still $14 to $18 per cwt above March levels before aggressive buying flooded into the complex. This leaves an extremely wide trading range that prices can shift back and forth without testing any significant market triggers. Cash hog trade is called $1 lower to 50 cents higher with most bids steady. Open interest added 1,267 positions (304,559). June slipped 4,995 positions (55,068) and July gained 4,347 positions (57,666). Cash lean index for 5/8 is $82.78 up $0.10. DTN projected slaughter for Friday is 440,000 head. Saturday runs are expected near 12,000 head.

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

(BAS)

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