DTN Before The Bell-Livestock

Firm Gains Develop Early Wednesday Across All Livestock Trade

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

Firm buyer support is expected to help draw buyer activity back into the complex with all contracts posting moderate gains. Nearby support is seen in both cattle and hog trade with gains reaching $1 per cwt in the early minutes of trade activity. It is uncertain just how deep buyer interest will develop given the underlying pressure through the week. Corn markets are trading higher in light trade activity. The stock market is trading higher in light early trade. Dow Jones is 113 points higher while Nasdaq is up 18 points.

LIVE CATTLE:

Opening call: 50 cents to $1 higher. Light-to-moderate early buyer support is slowly stepping into the live cattle trade as traders try to square positions following aggressive pressure early in the week. Traders not only are looking for a sense of stability during the last half of the week, but with month end just around the corner, there seems to be some underlying concern that market support may be hard to find if commercial buying is not redeveloped in the near future. Volume remains extremely thin, allowing prices to hold in a narrow range in the opening minutes of trade. This could allow for prices to become more volatile through the next several hours. Cash cattle markets are starting to show scattered interest with initial bids developing early Wednesday morning. A few bids are seen in the South at $117 live basis while Northern bids are developing at $185 per cwt. The development of the Fed Cattle Exchange Auction will likely help set the tone for the week, although overall sales numbers may once again be limited. Active feedlot sales may not develop until Thursday or Friday at this point. Open interest Tuesday fell 3,517 positions (373,215). Spot August lost 3,670 positions (53,706) and October contracts fell 2,499 positions (186,057). DTN projected slaughter for Wednesday is 119,000 head.

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FEEDER CATTLE:

Opening call: 50 cents to $1 Higher. Commercial buying has quickly stepped into the cattle complex early Wednesday morning in reaction to the aggressive two-day market slide seen across the complex. Front-month August futures have tumbled nearly $6.50 per cwt during the week, and this move is allowing traders to square positions given the extremely light trading volume during early trade. It is uncertain just how much additional buyer support will develop through the morning as large inventory levels hovering over the industry continue to keep traders uncertain about long-term buying activity. Support stalled out Tuesday in early trade when gains reached $1 per cwt, which could be the case once again midweek. Cash lean index for 7/24 is $151.57, down $0.31. Open interest Tuesday added 95 position (60,578).

LEAN HOGS:

Opening call: Steady to $1 higher. Firm gains have slowly developed in lean hog futures trade as follow-through support is moving into the market following the late-day buyer interest that started to develop Tuesday afternoon. The expectation that some stability is starting to be seen in cash hog markets and firmness continues to be seen in pork demand is helping to draw commercial buyer activity back into nearby lean hog futures. This has quickly pushed August futures above $82 per cwt, which could spark some underlying additional support late in the week. Cash bids are steady to 50 cents lower with most bids steady. Open interest Tuesday fell 1,421 positions (269,133). Spot month August liquidated 1,076 positions (35,744) and October lost 851 positions (116,978). Cash lean index for 7/24 is $90.44, down 0.69. DTN projected slaughter for Wednesday is 440,000 head. Saturday runs are expected at 63,000 head.

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

(SK)

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Rick Kment