DTN Before The Bell-Livestock

GENERAL COMMENTS

Sharp losses Tuesday in cattle futures through the end of the day will create additional volatility midweek as traders are now focusing on increased positing as well as short covering opportunities. The limit losses in feeder cattle create expended limits and set a weaker tone, but may allow for some renewed buyers support to develop. Corn markets are trading higher in light trade activity. The stock market is trading higher in light early trade. Dow Jones is 40 points higher while Nasdaq is up 22 points.

LIVE CATTLE:

Opening call: Mixed. Feeder cattle market losses led the sharp pressure Tuesday in the live cattle complex, but the overall tone of the market remains relatively unsettled through early morning trade. Activity is likely to remain mixed to mostly higher through most of the morning as traders continue to focus on the potential for firming fundamental support during the week. This could lead to moderate to firm nearby gains in the live cattle complex as the morning develops, but trade volume remains extremely light. Cash cattle activity remains quiet early in the day with bids and asking prices still hard to come by as light activity has been seen on either side so far this week. The sharp losses late Tuesday will likely quickly cause both sides to readjust expectations and could create some uncertainty through the week. The Fed Cattle Exchange Auction will likely be the first indication of cash market activity Wednesday morning, with feedlot trade potentially held off until later in the week. Open interest Tuesday added 501 positions (414,711). Spot June liquidated 1,999 positions (18,176) and August contracts fell 353 positions (196,685). DTN projected slaughter for Wednesday is 116,000 head.

FEEDER CATTLE:

Opening call: Mixed. Early trade is expected to remain mixed to moderately lower following limit losses in the last few minutes of trade Tuesday. The sharp turnaround in the market seemed to be based more on lack of interest in the market and buyers unwilling to stay committed to the complex than any other major factor. This will likely create additional bearish market shifts, but will also open the door to short covering opportunities through the end of the session. Cash lean index for 6/5 is $152.59, up $0.20. Open interest Tuesday added 562 position (57,455).

LEAN HOGS:

Opening call: Mixed. Traders continuing to focus on strong fundamental support which is driven by the cash market over the last couple of weeks. But this is limiting futures trade activity with initial trade expected to remain sluggish through most of the morning as activity may be confined to single-digit price levels or less for most of the morning. The ability to break above $82 per cwt in summer contracts once again could help to instill additional longer term technical support, but for now traders remain content with the narrow and sluggish trade activity. Cash bids are steady to $2 higher with most bids $1. Open interest Tuesday added 3,658 positions (249,339). Spot month June lost 491 positions (17,351) and July lost 1,275 positions (60,990). Cash lean index for 6/5 is $78.20, up $0.30. DTN projected slaughter for Wednesday is 440,000 head. Expected runs Saturday are at 28,000 head.

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

(SK)

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