DTN Before The Bell-Livestock

Late-Week Cattle Gains Off-Set Lean Hog Market Pressure

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

Livestock futures are expected to remain mixed through most of the session Friday. Firm gains in cattle futures have countered early week losses. The triple-digit gains seen in the feeder cattle complex have allowed for additional market shifts while moderate to strong pressure is holding in hog trade. Corn markets are trading higher in light trade activity. The stock market is trading lower in light early trade. Dow Jones is 35 points lower while Nasdaq is down 15 points.

LIVE CATTLE:

Opening call: Steady to $1 higher. Light trade is seen early Friday morning, although buyer interest is starting to redevelop through the complex. The focus on commercial buyers stepping back into the complex following the strong market shift lower through the week is helping to push most contracts firmly higher. August through December contracts are holding triple-digit gains, currently trading $1 per cwt higher. This is sparking a firm but contained market support as traders may focus on the ability to move additional longer term gains into the market. June futures continue to lead the market higher, with prices at $123 per cwt while the rest of the market is still holding under $120 per cwt in moderate support. Light volume is expected to be seen through most of the morning as traders remain focused on potentiation end of the week positioning. Cash cattle activity remains extremely sluggish early Friday with the expectation that cattle trade will have to develop in all areas before the end of the day. Trade so far this week is light to moderate in all areas and packers are likely to need to get access to more cattle. Although just how many more cattle is still the uncertainty of the week. The trading range seen so far this week has been $128 to $134 per cwt in the South and $205 to $217 per cwt. The highs in each of these ranges were set early in the week. Open interest Thursday liquidated 3,938 positions (405,802). Spot June lost 1,727 positions (9,245) and August contracts fell 2,483 positions (185,781). DTN projected slaughter for Friday is 111,000 head.

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FEEDER CATTLE:

Opening call: 50 cents to $1 higher. Firm buyer support is moving back into cattle markets as the ability to bring a sense of stability back into the complex seems to have calmed traders concerned for the time being. This may help to instill the potential for triple digit buyer support over the near future with nearby feeder cattle possibly gaining back a portion of the early week losses. At this point it may not help to correct the fundamental damage done to the cattle market, but it could go a long way in helping to bring traders back to the table early next week. Cash lean index for 6/14 is $152.73, up $1.19. Open interest Thursday liquidated 799 position (55,391).

LEAN HOGS:

Opening call: Steady to $1 lower. Follow through pressure continues to develop through the complex with traders focusing on additional market liquidation in nearby and deferred lean hog futures. Despite the firm support in cash values through the end of the week, trader interest continues to fade which could spark additional liquidation through the next couple of weeks. Cash bids are Steady to $1 higher with most bids $1 higher. Open interest Thursday fell 422 positions (254,070). Spot month July liquidated 1,981 positions (35,262) and August gained 787 positions (87,977). Cash lean index for 6/14 is $82.93, up $0.83. DTN projected slaughter for Friday is 420,000 head. Saturday runs are expected at 51,000 head.

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

(SK)

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Rick Kment