DTN Before The Bell-Livestock

Follow-Through Pressure Develops Across Cattle Trade Mid-week

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

Cattle futures have turned lower once again as feeder cattle markets are leading the surge lower with a triple digit price loss. The push lower follows sharp losses in both live cattle and feeder cattle futures Tuesday and increased volatility during the entire week. Hog markets remain mixed as firming buyer activity is stepping into nearby contracts while deferred futures have remained lower during initial trade. Corn markets are trading lower in light trade activity. The stock market is trading higher in light early trade. Dow Jones is 95 points higher while Nasdaq is up 1 point.

LIVE CATTLE:

Opening call: Steady to 50 cents lower. Light pressure is slowly trickling into the live cattle futures market. This is following sharp triple digit losses Tuesday in the live cattle markets, as well as firm pressure also seen in the feeder cattle market so far early in the trading session. The underlying weak tone across the cattle complex as well as strong pressure in boxed beef values has added market softness in the live cattle contracts. This may add even more softness to the complex through the entire cattle trade through the day. It is uncertain just how much selling pressure still exists in the market, but buyer support could quickly develop later in the morning, helping to bring a sense of stability through the complex. Cash cattle activity remains quiet early Wednesday morning with the focus on the upcoming Fed Cattle Exchange Auction which will trade through the morning. This will likely be the first indication of cash business seen for the week, although given the sluggish movement over the last couple months, it may not give a clear indication of how traders will react to the wide price shifts seen in futures markets over the last couple of days. A few asking prices have been seen at $123 live basis, but there continues to still be some uncertainty in the market given the overall market shifts over the last few days. Open interest Tuesday lost 4,090 positions (386,118). Spot June lost 858 positions (1,978) and August contracts fell 3,780 positions (170,956). DTN projected slaughter for Wednesday is 117,000 head.

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FEEDER CATTLE:

Opening call: Steady to $1 lower. Triple digit losses have once again developed in nearby feeder cattle contracts. This lack of buyer support continues to limit the ability for buyers to move into the complex through the end of the month, as well as focus on adjustments to potential market firmness in the beef market long term. Continued pressure through the end of the week will give the expected weight to the initial expectation of last week's cattle on feed report which was viewed as bearish. Even though buyer support pushed prices limit higher on Monday, the follow through pressure over the last couple of days have retracted these gains and then some, pushing prices near support levels set last week. A move and close below these levels, would likely spark additional liquidation through the feeder cattle and live cattle complex. Not only through the end of the month, but during early July. Cash lean index for 6/23 is $145.84, down $1.25. Open interest Tuesday added 281 position (56,313).

LEAN HOGS:

Opening call: Mixed. Lack of direction is once again seen in lean hog futures trade Wednesday morning with traders focusing on the inability for traders to bring unified market activity to the complex during initial trade activity. Early support is slowly developing in July and August contracts which is helping to continue to push front month futures near $87 per cwt, testing contract highs once again. But light to moderate pressure continues to be seen in October through June futures as the inability to bring follow through interest has been the theme through the entire summer as these deferred contracts continue to hold significant discounts based on expected production growth and uncertainty of long term demand. Cash bids steady to $1 lower with most scattered through the range. Open interest Tuesday lost 1,237 positions (257,529). Spot month July liquidated 1,007 positions (20,978) and August fell 1,826 positions (93,211). Cash lean index for 6/23 is $90.62, up $0.45. DTN projected slaughter for Wednesday is 435,000 head. Expected runs for Saturday are currently at 21,000 head.

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

(SK)

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Rick Kment