DTN Before The Bell-Livestock

Strong Pressure Redeveloping Across Cattle Trade

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

Livestock futures are mixed in light volume early Tuesday morning. Follow-through pressure has quickly flooded into cattle trade. The movement has quickly turned to triple-digit losses in feeder cattle futures. This may add to uncertainty through the entire cattle market. Buyer support is moving back into hog futures with increased support seen in most contracts during early minutes of trade. Corn markets are trading lower in light trade activity. The stock market is trading lower in light early trade. Dow Jones is 20 points lower while Nasdaq is down 12 points.

LIVE CATTLE:

Opening call: 30 to 80 cents Lower. Moderate pressure has redeveloped across live cattle futures with traders focusing on sharp early losses in feeder cattle trade. The lack of underlying support in the entire cattle market is creating a weak market structure and leaving traders extremely vulnerable to widespread liquidation. So far open interest has started to fade slightly, but strong commercial buyer support continues to hold across the complex which is creating some extreme nervousness across the entire market. This could lead to additional liquidation given the market situation and recent pressure in cash markets. Cash cattle activity remains quiet early Tuesday morning with bids once again undeveloped early through the morning. It is expected that asking prices may remain poorly defined given the lack of support in futures trade and overall uncertainty through the overall complex. This could keep active trade delayed until the end of the week, and the tone of the market defensive. Open interest Monday liquidated 3,333 positions (401,145). Spot June lost 707 positions (7,520) and August contracts fell 2,093 positions (182,999). DTN projected slaughter for Tuesday is 117,000 head.

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FEEDER CATTLE:

Opening call: $1 to $2 lower. Sharp triple digit losses have quickly flooded back into the feeder cattle complex once again Tuesday morning. This lack of support across the market continues to leave the market extremely vulnerable not only for additional widespread liquidation, but the potential for a limit down market swing over the next couple days could quickly change the tone of the market through the rest of the summer. Cash lean index for 6/16 is $150.18, down $0.93. Open interest Monday lost 245 position (54,846).

LEAN HOGS:

Opening call: Steady to 50 cents higher. Light follow through buyer support is slowly stepping back into the lean hog futures complex with traders more aggressively moving into the summer contracts once again. This has continued to focus on July contracts which has pushed front month trade above $84 per cwt in initial morning trade with an 80 cent rally. The potential to spark additional follow through support across the rest of the complex could bring some solid buying activity during the rest of the morning. Cash bids are steady to $1 higher with most bids expected $1 higher. Open interest Monday fell 4,092 positions (245,180). Spot month July liquidated 4,557 positions (30,467) and August added 2,238 positions (89,784). Cash lean index for 6/16 is $85.32, up $1.24. DTN projected slaughter for Tuesday is 430,000 head. Currently no slaughter is expected Saturday.

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

(SK)

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Rick Kment