DTN Before The Bell-Livestock

Short-Covering Supports Cattle Futures Prior to Cash and On Feed News

John Harrington
By  John Harrington , DTN Livestock Analyst
(DTN photo by Nick Scalise)

Feedlot country remains in slow gear this morning with just a few bids of $110 reported in parts of the South. Significant trade volume could be delayed until after the release of the on feed report this afternoon at 2 CDT. The cash hog trade in the early rounds is reporting bids of steady to $1 higher. Most packer efforts seem to be 0.50-$1 stronger than Thursday. Firming early on export sales, corn futures are now drifting lower with lackluster traders focusing on standard harvest pressure. Encouraged by progress toward tax reform in the Senate, the stock market is moving higher this morning with the Dow up 72 points and the Nasdaq better by 28.


Live issues are firming this morning (i.e., mostly 40 to 60 higher) with the help of late-week short-covering and signs of improving carcass value. Yet the positioning continues to be restricted to a fairly narrow trading range (e.g., 110-112 basis October). It's quite possible that the board could close the week without knowing the real extent of cash potential. Open interest on Thursday decreased by 783 (327,798). Spot October liquidated by 721 (5,204) and December declined by 1,832 (143,376). DTN projected slaughter for today is 114,000 head. Saturday's cattle kill will probably be close to 55,000.


Like their live counterparts, feeder issues are moderately higher in the early going (i.e., up 10 to 50). Traders here are particular eager to learn of the exact size of the September placement (the average trade guess is betting on 108% increase over 2016) and what it implies about feeder supplies through the balance of the year. Open interest on Thursday increased by 646 (61,180). CME cash feeder index for 10/18: $155.08, off $0.18.


Lean hog futures are narrowly mixed as of the writing, up 25 to off 20. Generally speaking, nearbys continued to gain on deferreds, a function of October's red-hot cash market. Open interest on Thursday increased by 2,129 (247,664). Spot December added 212 (118,206) and February increased by 649 (47,699). Cash lean index 10/18: $63.34, up $1.13. DTN projected slaughter for Friday is 465,000 head. Saturday's kill should total close to 196,000.

John A. Harrington can be reached at john.harrington@dtn.com


John Harrington