DTN Before The Bell-Livestock

GENERAL COMMENTS

Follow-through pressure is seen in cattle trade as weakness from the cattle on feed report is still bringing market losses to the complex. This may soften both live cattle and feeder cattle trade over the near future, although losses have remained narrow during the first few minutes Tuesday morning. The potential that commercial buying may quickly develop once selling pressure quickly runs out of steam could quickly push prices higher through the morning. Corn markets are trading lower in light trade activity. The stock market is trading mixed in light early trade. Dow Jones is 22 points lower while Nasdaq is up 3 points.

LIVE CATTLE:

Opening call: Steady to 50 cents lower. Follow through pressure is likely to quickly develop into the live cattle market in the initial minutes of trade early Tuesday following the strong triple digit losses based on the bearishness of both cash cattle trade as well as weakness from the cattle on feed numbers. But once selling pressure runs out of gas, buyers may quickly step into the market. This could allow for increased buyer support and spark increased support over through day with firm buyer support possible through the afternoon, especially if firm gains are seen in boxed beef values. Cash cattle activity remains sluggish Friday morning following additional light trade which developed through the North on Thursday. It is expected that most of the trade for the week is likely to be done for the week. Cash cattle markets will remain quiet early Tuesday as packers and feeders return from the holiday Tuesday morning. With bids and asking prices likely delayed until Wednesday as show list distribution and inventory taking will be the main order of business of the day. But the pace of the day and week will be accelerated slightly due to the shortened holiday week, but there still is likely to be little sense of urgency at this point. The overall weakness in the market leading up to last week's cash cattle trade may leave most sides relatively cautious. Open interest Friday gained 953 positions (419,981). Spot June liquidated 3,324 positions (38,756) and August contracts added 924 positions (195,364). DTN projected slaughter for Tuesday is 116,000 head.

FEEDER CATTLE:

Opening call: Steady to $1 lower. Continued pressure is quickly developing through feeder cattle futures as traders adjust to the larger than expected placement that was seen in the May 1st cattle on feed report last week before the long holiday weekend. Due to the holiday weekend, the cattle on feed report was scheduled for an early release and was released during trading hours instead of after trading closed as is usually the case. This allowed for most of the bearishness of the report to be accounted for during the Friday session of the market, but spill over pressure is still developing in the initial minutes of trade. But once this pressure settles through the complex, there may be some sense that buyers may step in and reestablish a sense of market stability at some point in the morning. This could lead to additional market volatility during the Tuesday session, and increased commercial market activity through the next couple of days. Cash lean index for 5/25 is $143.89, up $0.80. Open interest Friday fell 703 position (56,849).

LEAN HOGS:

Opening call: Mixed. Light trade is expected to redevelop through the lean hog futures once again Tuesday morning as the focus strong fundamental support across the hog complex and continued technical support last week continues to draw commercial support back into the market. Lean hog futures expanded lean hog futures to new contract highs at the end of last week, as June futres closed at $81.82 per cwt while July contracts moved to $81.90 per cwt. This is likely to create not only spill over follow through buying, but a combination of position taking early in the week, leaving a potential of mixed trade through the complex. Cash bids are 50 cents lower to $1 higher most bids steady 50 cents higher. Open interest Friday added 3,954 positions (237,980). Spot month June lost 414 positions (26,626) and July added 681 positions (64,400). Cash lean index for 5/25 is $76.34, up $0.09. DTN projected slaughter for Tuesday is 440,000 head. Saturday runs are expected to be seen at 220,000.

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

(SK)

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