DTN Before The Bell-Livestock

Strong Triple-Digit Losses Develop in Hog and Feeder Cattle Futures

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

Strong pressure is redeveloping in feeder cattle and lean hog futures trade early Wednesday morning as additional seller interest is quickly seen from the commercial side of the market. This may continue to develop through most of the morning as traders continue to focus on market shifts through midweek. Corn markets are trading higher in light trade activity. The stock market is trading lower in light early trade. Dow Jones is 10 points lower while Nasdaq is down 18 points.

LIVE CATTLE:

Opening call: Steady to 50 cents lower. Light to moderate weakness is trickling into live cattle trade early Wednesday morning with traders focusing on building pressure in feeder cattle trade. The pullback from the contract highs last week has allowed for moderate follow-through selling to redevelop. Additional focus is also being placed on outside market activity following the shifts in the grain complex after the September USDA crop report Tuesday. Overall trade activity through most of the morning is expected to remain sluggish, leaving many traders focusing on fundamental market direction. Cash cattle markets remain quiet Wednesday morning. The first activity is expected to be seen in the Fed Cattle Exchange Auction, although this may not give much of a market indication as overall volume may not remain extremely active through the week, and may leave most feedlot managers still hesitant to step into the complex. Packer bids are still hard to find, but should become more abundant through the morning. Open interest Tuesday fell 1,951 positions (320,985). Spot October lost 8,765 positions (105,120) and December contracts added 4,004 positions (105,666). DTN projected slaughter for Wednesday is 117,000 head.

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FEEDER CATTLE:

Opening call: 50 cents to $1 lower. Follow-through pressure is developing in feeder cattle futures with nearby contracts holding a $1 per cwt loss through the complex. The overall lack of support in front month contracts could limit additional spillover weakness through the entire complex as contracts ease off of month long highs. A combination of position taking and long-term market uncertainty is starting to develop through the complex with traders focusing on outside market trade activity as well as the moves in live cattle trade. Firm shifts through the rest of the feeder cattle complex may continue to add to the pressure in the entire market through the day. Cash lean index for 9/11 is $148.97, down 0.04. Open interest Tuesday added 639 position (51,515).

LEAN HOGS:

Opening call: Steady to $1 lower. Continued liquidation is seen in lean hog futures trade early Wednesday morning as strong pressure is seen in nearby contracts. Front month October futures are holding a $1 per cwt following the break through support levels earlier in the week. This has continued to drive selling pressure into the market. The rest of the complex is contained to 45 to 50 cent losses as nearby futures are still holding above short term support. But the potential to break through these levels could quickly change the overall direction of the market over the next several days. December contracts are defending late August support levels of $56.15 per cwt, which is 50 cents under current market trade. Cash bids are 50 cents to $1.50 lower with bids scattered through the range. Open interest Tuesday added 291 positions (249,379). Spot month October slipped 5,214 positions (73,145) and December added 5,718 positions (87,750). Cash lean index for 9/11 is $67.37, down 0.55. DTN projected slaughter for Wednesday is 450,000 head. Saturday runs are expected to be at 180,000 head.

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

(SK)

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Rick Kment