DTN Before The Bell-Livestock

GENERAL COMMENTS

Early trade Wednesday morning started out with lackluster movement in narrowly mixed price direction. The overall lack of movement through the complex Wednesday morning is focused on position adjustments following the aggressive market gains in cattle trade Tuesday. But without follow through interest it is uncertain just how much end of the week support can develop in all markets in order to sustain the current market rally. Corn futures are higher in light trade. Stock market futures remain mixed. Dow Jones is 2 points higher while Nasdaq is down 2 points.

LIVE CATTLE:

Open: Mixed. Despite the sharp triple-digit gains which flirted with limit gains during the Tuesday session, prices have opened and are trading in a very tight but narrowly mixed pattern early Wednesday. This has allowed very little additional direction to develop through the morning, although there are questions as to just how much support there will be on either side of the market during the morning. Futures traders continue to look for additional direction from the cash markets as well as beef values, but the higher trade ranges this week is also likely to spark increased market volatility and positioning by many traders. Cash cattle activity remains extremely quiet going into midweek with feedlot managers becoming as aggressive as ever given the sharply higher futures trade which developed Tuesday. Packer have not shown their hand and are likely to wait until midday or later before establishing bids. It is expected that the activity on the Fed Cattle Exchange Auction will remain light, but may give some indication of the mentality of packers Wednesday as both sides move forward. Open interest Tuesday gained 5,720 positions (336,116). Spot October lost 752 positions (2,351) and December contracts added 152 positions (140,958). DTN projected slaughter for Wednesday is 117,000 head.

FEEDER CATTLE:

Open: Mixed. Mixed early trade is seen through feeder cattle futures due more to lack of volume in the initial minutes of trade rather than any change in direction across the complex. This may allow for follow through buyer support which posted aggressive triple-digit gains Tuesday and helped to spark widespread market support as prices continue to retest market resistance through the last half of October. A strong upward move midweek would likely break through September highs, creating additional support across most contract months. Cash lean index for 10/23 is $154.59, down 0.10. Open interest Tuesday added 797 position (62,899).

LEAN HOGS:

Open: Mixed. Light pressure in nearby lean hog futures have allowed for traders to slowly but carefully step back from the market in the opening minutes of trade Wednesday. This lack of support is not likely to turn into a significant market shift at this point with traders unwilling to break out of the current choppy but positive market pattern seen over the month of October. The firmness in deferred futures in early trade is helping to create a market balance and could spark additional buyer interest. Cash bids are called 50 cents lower to $1 higher per cwt higher with most bids steady. Open interest Tuesday added 1,428 positions (251,877). Spot month December slipped 1,047 positions (114,731) and February added 822 positions (50,206). Cash lean index for 10/23 is $65.10, down 0.13. DTN projected slaughter for Wednesday is 465,000 head. Saturday runs are expected for 201,000 head.

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

(SK)

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