DTN Before The Bell-Livestock

GENERAL COMMENTS

Strong follow-through support is seen in cattle trade as triple-digit gains are quickly developing in live cattle and feeder cattle markets. This support is creating some increased volatility given the uncertainty in front of the cattle on feed report being released Friday afternoon. There is expected to be some additional market shifts through the rest of the session in all markets. Corn markets are trading lower in light trade activity. The stock market is trading higher in light early trade. Dow Jones is 100 points higher while Nasdaq is up 22 points.

LIVE CATTLE:

Opening call: $1 to $1.50 Higher. Strong late-week gains have developed in live cattle trade as buyers have quickly moved back into the complex. This is quickly moving back into the complex as traders are shifting into the complex with traders focusing on the expectation that the oversold market shifts earlier in the week may bring about some increased commercial interest ahead of the weekend break. But the upcoming cattle on feed report is expected to carry a bearish tinge to it, which could limit the support seen early Friday morning. Cash cattle markets remain quiet early Friday morning following additional light trade with prices steady to weak from earlier in the week. Prices in the North have been seen at $165 to $170 dressed basis while trade in the South was around $106 live basis. Asking prices are likely to be seen around $108 in the South and $173 in the North. Even though overall sales numbers are expected to have remained light to moderate, trade may be done in most areas. It may just depend on futures activity and the cattle on feed report through the afternoon. Open interest Thursday added 1,528 positions (316,988). Spot August lost 1,036 positions (2,412) and October contracts lost 386 positions (151,520). DTN projected slaughter for Friday is 116,000 head.

FEEDER CATTLE:

Opening call: $1 to $2 higher. The volatility in feeder cattle markets has continued to be seen through the week with aggressive triple-digit gains flooding back into the complex Friday morning. Traders are quickly positioning contracts in front of what is expected to be a potential bearish cattle on feed report. But much of the impact of this report is likely already worked through the market, creating some uncertainty as to just how much additional market shifts will develop through the day as well as early next week. With the cattle on feed report released following the close of trade Friday, traders will not actually trade the report until early Monday morning, allowing all of Friday's activity being pre-report positioning activity and cash cattle market shifts. Cash lean index for 8/23 is $143.42, up 0.04. Open interest Thursday fell 515 position (53,762).

LEAN HOGS:

Opening call: Mixed. Narrow trade has slowly developed through the lean hog futures trade early Friday morning with front month October futures posting narrow losses in the opening minutes of trade while the rest of the complex focused on single digit gains. The continued lack of pressure in cash hog trade is limiting support through the entire lean hog futures complex even though there is very little support to aggressively push prices lower at this point. Prices are likely to remain stuck in a narrow range through the end of the week, with very little direction expected. Cash bids are $1 to $2 lower with most bids $1 lower. Open interest Thursday liquidated 676 positions (252,022). Spot month October slipped 1,534 positions (108,490) and December added 825 positions (59,243). Cash lean index for 8/23 is $79.40, down 1.09. DTN projected slaughter for Friday is 425,000 head. Saturday runs are expected at 144,000 head.

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

(SK)

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