DTN Before The Bell-Livestock

GENERAL COMMENTS

Sharp losses in cattle markets have stolen the limelight of the livestock market Wednesday morning with traders focusing on live cattle and feeder cattle markets trading at or near-limit losses during the first few minutes of trade. The concerns of widespread liquidation that may continue through the week could lead to increased pressure in the market. Hog markets remain mixed in a moderate range, although the pressure in cattle trade is weighing on early gains. Corn markets are trading higher in light trade activity. The stock market is trading higher in light early trade. Dow Jones is 16 points higher while Nasdaq is up 8 points.

LIVE CATTLE:

Opening call: $2 to $3 lower. Sharp losses have quickly developed early Wednesday morning with traders focusing on market pressure midweek. The overall lack of support in the complex may continue to limit additional support through the complex and could create limit losses not only in nearby contracts but in several nearby contracts. The pressure in feeder cattle contracts as well as concern that the softness in cash values and potential commercial liquidation that could develop may spark follow through selling for days to follow is creating a sense of panic across the market. Cash cattle trade started to trickle into the market late Tuesday afternoon, but the overall volume seen in Nebraska and Kansas was not enough to establish a market trend with live cattle markets selling from $130 to $134 per cwt while dressed deals selling from $210 to $216 per cwt. Bids are expected to remain relatively hard to come by early in the morning once again as the market waits for information from the Fed Cattle Exchange Auction. Asking prices on feedlot cattle are around $135 live basis and $218 and higher dressed at this point. Open interest Tuesday liquidated 422 positions (413,639). Spot June lost 756 positions (12,798) and August contracts fell 1,157 positions (190,815). DTN projected slaughter for Wednesday is 115,000 head.

FEEDER CATTLE:

Opening call: $3 to $4 lower. Sharp triple-digit losses have quickly and aggressively flooded into the market Wednesday morning with traders focusing on prices moving to $4 per cwt losses in the early minutes of trade. The fact that feeder cattle trade has posted triple digit losses each of the two trading sessions this week seems to have primed the pump for market liquidation, allowing for full-fledged selling activity to develop at opening bell. This could easily lead to limit lower trade through the midweek session as traders remain concerned of not only weaker short term pressure in the market, but a longer term market weakness developing in the cattle complex. Cash lean index for 6/12 is $154.21, up $0.06. Open interest Tuesday added 197 position (57,203).

LEAN HOGS:

Opening call: Mixed. Light trade is once again developed in lean hog futures trade with early support moving into nearby contracts. The support seen across the complex is helping to spark follow through buyer activity in July contracts, and moving prices above $83 per cwt with an early 80 cent gain. This move has helped to solidify summer contracts at or above the $80 per cwt level with fundamental support holding. The August to October price spread remains wide, is expected to widen as time continues which could bring some additional volatility back into the market. Cash bids are steady $2 higher with most bids 50 cents to $2 higher. Open interest Tuesday gained 2,621 positions (254,084). Spot month June lost 1,461 positions (11,366) and July lost 4,468 positions (38,731). Cash lean index for 6/12 is $81.16, up $0.57. DTN projected slaughter for Wednesday is 435,000 head. Saturday runs are expected at 51,000 head.

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

(SK)

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