DTN Before The Bell-Livestock

Cattle Markets Surge Higher Early Monday

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

Strong buyer support has flooded into the market early in the week. This has helped to spark additional interest through the live cattle and feeder cattle market. Hog futures on the other hand have remained sluggish in a narrow trading range. The overall sluggish market activity seen in hog markets could turn volatile later in the day given outside market shifts. Corn markets are trading higher in light trade activity. The stock market is trading higher in light early trade. Dow Jones is 45 points higher while Nasdaq is up 19 points.

LIVE CATTLE:

Opening call: $1 to $2 higher. Strong market support has continued to redevelop through the complex following the aggressive Friday rally which flooded the complex despite fundamental pressure in the complex. Cash cattle trade remained weak over the last couple of weeks and concerns that uncertainty given the lack of beef value support in the near support may limit buyer activity during the holiday week may limit additional cash market activity. But this is not limiting commercial buyer activity in the futures market over the last couple of trading sessions as they aggressively step into nearby contracts like they are going out of style. The concern that a break below $120 per cwt may have been the seasonal low a week ago was distant history as prices have surged past that price level on the way to $122 per cwt with buyers quickly moving into the market Monday morning. With a shortened trading week, lighter than average trade activity is expected to be seen through the first half which could bring additional volatility to the market. Cash cattle activity is expected to remain quiet early Monday as packers go into the week short bought once again this week. Trade at the end of last week is expected to have been light with the overall number of cattle sold being light to moderate at best, although numbers still unavailable at this time. Show list distribution is expected to be the main focus of the morning as inventory taking during the holiday week may continue to keep many packers and feeders busy. Open interest Friday added 2,481 positions (394,308). Spot April liquidated 964 positions (29,237) and June contracts gained 211 positions (184,554). DTN projected slaughter for Monday is 114,000 head.

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FEEDER CATTLE:

Opening call: $1 to $2 Higher. Triple-digit gains have continued to surge back into the cattle futures market following the aggressive technical support seen late last week. Despite the fundamental pressure and lack of cash market support seen over the last couple of weeks, buyer support has exploded in both feeder cattle and live cattle futures markets. Although April contracts still remain under short term resistance levels, of $136.35 set in March, May contracts are trading at short term highs. This support is helping to draw additional aggressive support back into the market and likely to spark additional buyer interest back into the market through the morning. Cash lean index for 4/5 is $133.21, up 0.08. Open interest Friday added 434 position (58,515).

LEAN HOGS:

Opening call: Mixed. Narrow gains have slowly developed through the lean hog futures complex with 5 to 15 cent losses developing in spring and summer contracts during the initial minutes of trade. The focus on the lean hog market has been market stability following the pressure which developed at the end of last week where all nearby contracts posted moderate pressure based on follow through softness based on moderate softness in summer and fall market pressure. This led to the concern that softness is being added to the pressure in the weakness in the pork complex during the summer months while supply levels continue to build throughout the second and third quarter of the year. Cash bids are expected to be seen 50 cents to $1 per cwt lower with bids scattered through the range. Open interest Friday added 903 positions (203,184). Spot month April fell 545 positions (12,641) and June gained 690 positions (83,792). Cash lean index for 4/5 is $66.15, down $0.45. DTN projected slaughter for Monday is 442,000 head.

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

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Rick Kment