DTN Before The Bell-Livestock

GENERAL COMMENTS

Cattle futures are trading lower in light volume with feeder cattle markets trading firm to moderate losses during early trade. June futures are holding narrow gains as early support is attempting to hold Thursday morning, while the rest of the complex is shifting lower once again. Lean hog futures have trickled lower in a narrow range. Corn markets are trading lower in light trade activity. The stock market is trading higher in light early trade. Dow Jones is 72 points higher while Nasdaq is up 27 points.

LIVE CATTLE:

Opening call: Mixed. Light gains have been slowly developing in nearby contracts as short-covering activity is seen in the June and August contracts. The rest of the complex remains under pressure with follow through pressure developing across the market. This lack of support is evident through the entire market. The softness in deferred contracts is likely to weigh on nearby contracts through the rest of the morning as buyer support may not be deep enough to outweigh the support seen in the first few minutes of trade. This could lead to additional long term pressure, although traders are focusing on defending support levels over levels through the end of the month. Cash cattle markets remain generally quiet early Thursday morning following the light to moderate activity following the Fed Cattle Exchange activity. Activity in the South was generally $131 to $132.75, which was mostly $132 per cwt and $2 per cwt lower than last week. Northern trade was mostly $208 which was $5 per cwt lower than last week. Without significant shift in futures markets, it is likely that the tone of the market has been set for the week. But some additional trade may need to be done before the end of the week. Cash cattle trade may start to develop through the end of the day, but more than likely active trade will be delayed until sometime Thursday. Open interest Wednesday fell 1,940 positions (418,875). Spot June liquidated 3,285 positions (45,997) and August contracts added 1,011 positions (192,144). DTN projected slaughter for Thursday is 115,000 head.

FEEDER CATTLE:

Opening call: Steady to $1 lower. Pressure is developing in feeder cattle futures as technical pressure is adding to the market with $1 per cwt losses moving into May contracts and pushing front month contracts to $143 per cwt. The overall lack of support in the entire complex is not only limiting trade activity, but creating a longer term weaker outlook through the second half of the year. This may spark additional pressure in live cattle markets as traders remain focused on uncertainty in cash and beef values through late summer markets. Cash lean index for 5/23 is $143.40, up $0.13. Open interest Wednesday fell 796 position (57,762).

LEAN HOGS:

Opening call: 10 to 30 cents lower. Light pressure is slowly developing Thursday morning as traders are focusing on the potential of market stability through the entire lean hog market at this point. Lack of overall trade activity at the end of the week and the long holiday weekend could limit overall price movement through the rest of the session but could keep nearby lean hog futures within a single-digit price range during much of the morning. The ability to keep prices above $80 per cwt through the end of the week will help to sustain long term support through the entire complex. Cash bids are seen 50 cents lower most bids steady. Open interest Wednesday added 4,029 positions (231,583). Spot month June lost 266 positions (28,127) and July added 855 positions (63,022). Cash lean index for 5/23 is $76.07, up $0.13. DTN projected slaughter for Thursday is 442,000 head. Saturday runs are expected to be seen at 3,500.

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

(SK)

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