DTN Before The Bell-Livestock

GENERAL COMMENTS

Firm gains have quickly developed in cattle markets as renewed buyer support has moved back into the market. The volatility seen over the last couple of days is sparking increased market shifts, which may bring about even more price swings through the end of the week. Lean hog futures remain firmly higher in front month futures, but beyond that point, lack of direction is detected with very little movement or incentive for traders to step into the market. Corn markets are trading higher in light trade activity. The stock market is trading mixed in light early trade. Dow Jones is 9 points lower while Nasdaq is up 14 points.

LIVE CATTLE:

Opening call: Steady to $1 higher. Strong gains have quickly developed across the complex with the most aggressive buyer support seen in front month June contracts. The reaction to traders pulling back from triple digit losses Tuesday and closing mixed in a narrow range seemed to create a slightly more optimistic outlook on the entire market structure. The tone of the cattle market is far from firm, but if this upward surge through the morning could hold through the next couple of trading sessions, there is expected to be some additional buyer support possible as open interest remains extremely strong. This could focus on another round of upward moving markets just before the holiday weekend. Cash cattle activity should become more defined through the day with increased activity developing across the complex. This could help to draw increased interest into the market. The Fed Cattle Exchange should trade through the morning, and after two weeks of technical difficulties, a smooth day of trade would be a relief. Bids are likely to start around $122 live basis and $195 dressed, with asking prices at $127 or higher live and $200 and higher dressed basis. Open interest Tuesday lost 1,381 positions (399,764). Spot June lost 1,011 positions (6,509) and August contracts fell 814 positions (182,184). DTN projected slaughter for Wednesday is 117,000 head.

FEEDER CATTLE:

Opening call: 50 cents to $1 higher. Strong gains have quickly developed through feeder cattle markets after traders backed away from market lows during the final hours of trade Tuesday. This pull back from what may be support levels could spark another round of active buyer support in the early minutes of trade. At this point it is too early to tell if active commercial buying is quickly stepping back into the market, or if this move higher is just another round of short covering seen across the complex. But the volatility in the complex may bring about wide-ranging price swings through the rest of the week. Cash lean index for 6/19 is $148.24, down $1.94. Open interest Tuesday lost 138 position (54,708).

LEAN HOGS:

Opening call: Mixed. Firm buyer support is redeveloping in July and August contracts early Wednesday morning in lean hog trade, but beyond that point, lack of direction is seen in all other contracts. There continues to be some additional strong strength coming from firming cash hog and pork value support, but the inability to spark support beyond summer contracts continues to create concerns about the longevity of the support across the lean hog futures complex. Cash bids are steady to $1 higher with most bids expected $1 higher. Open interest Tuesday gained 103 positions (245,282). Spot month July liquidated 3,437 positions (27,030) and August added 992 positions (90,775). Cash lean index for 6/19 is $86.55, up $1.23. DTN projected slaughter for Wednesday 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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