DTN Before The Bell-Livestock

Sharp Gains Quickly Flood Into Cattle Markets

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

Strong gains are quickly developing in cattle futures in late week positioning. The aggressive move higher in the live cattle and feeder cattle futures is not technically or fundamentally significant at this point, but is creating some late week shifts which could create some market adjustments which may create some market wide positioning through the end of the session. Hog futures are stable, and posting light gains, even though trade remains light. Corn markets are trading mixed in light trade activity. The stock market is trading lower in light early trade. Dow Jones is 29 points lower while Nasdaq is down 2 points.

LIVE CATTLE:

Opening call: $1 to $1.50 higher. Sharp gains have quickly redeveloped across the complex. This is quickly drawing buyers back into the market allowing for end of the week positioning opportunities. Although even a daily limit move in live cattle futures would not make a technical significant market shift at this point, the market move at the end of the week higher could help to bring some stability back into the complex. June live cattle futures are now trading at $125 per cwt which is helping to draw additional short term support and may limit morning pressure. Cash business is quiet early Friday morning and likely done for the week following activity which developed through the end of the afternoon Thursday. The overall lack of support in futures trade Thursday was too much for feedlot managers to overlook as they gave in to lower bids with live trade seen at $137 to $138 Which is $7 to $8 per cwt lower and $217 to $221 per cwt lower ($9 to $13 lower for the week). This overall pressure in the complex is expected to create additional uncertainty heading into the weekend and next week, leading to more potential pressure early next week. Open interest Thursday lost 1,104 positions (416,045). Spot June liquidated 10,771 positions (84,368) and August contracts added 7,659 positions (159,711). DTN projected slaughter for Friday is 111,000 head.

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FEEDER CATTLE:

Opening call: $2 to $3 Higher. Short covering activity is the main order of business seen through the complex has quickly developed at the end of the week in order to compensate for the aggressive pressure seen through the week. Early market shifts are posting gains from $1 to $3 per cwt higher, although volume is expected to remain light and traders may continue to stay on the sidelines for the most part through much of the day until next week. Cash lean index for 5/10 is $145.50, down $2.16. Open interest Thursday fell 818 position (57,936).

LEAN HOGS:

Opening call: Steady to 20 cents higher. Narrow gains have slowly developed early Friday morning with traders moving back into the market. This is helping to stabilize the lean hog complex following the pressure which started to develop Thursday, although the underlying tone of the market still remains firm. With summer contracts hovering around $77 per cwt, there continues to be uncertainty if there is enough legs under the market to prices above the $80 per cwt with the increased production coming on line through the summer months. Cash bids are steady to $1 higher with most bids steady. Open interest Thursday added 1,540 positions (215,080). Spot month May lost 79 positions (1,217) and June fell 5,235 positions (41,594). Cash lean index for 5/10 is $69.12, up $1.48. DTN projected slaughter for Friday is 420,000 head. Saturday runs are expected at 89,000 head.

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

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Rick Kment