DTN Before The Bell-Livestock

Livestock Futures Surge Higher Thursday Morning

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

Firm buyer support has quickly moved back into the livestock trade with cattle and futures holding gains at or near $1 per cwt through initial trade. The focus on position squaring following recent market liquidation is the main driver of buyer support at this point because nothing has changed in market fundamentals. Corn prices are higher in light trade. Stock markets are higher, Dow Jones is 169 points higher while Nasdaq is up 50 points.

LIVE CATTLE:

Open: Steady to $1.50 higher. Firm support is moving into nearby live cattle futures as traders try to offset the pressure seen midweek. Trade activity is expected to remain sluggish, although the firmer tone seen during the first few minutes of trade is likely to help draw increased overall support through the complex. Cash cattle should show increased interest through the day, although trade may not become evident until late in the week. Bids are redeveloping at $108 live basis, but this may not spark any initial interest as asking prices remain well above these levels. Open interest Wednesday gained 989 positions (319,495). Spot month August contracts lost 8,622 positions (94,105) and October contracts added 4,336 positions (104,943). DTN projected slaughter for Thursday is 119,000 head.

FEEDER CATTLE:

Open: Steady to $1 higher. Early buying activity has quickly moved into the feeder cattle futures in reaction to the sharp losses seen midweek. The overall tone of the market remains focused on outside market moves, which may see some additional volatility surrounding USDA supply and demand reports released later in the morning. Front-month August futures are leading the market higher with $1 per cwt gains, although buyer activity is expected to remain sluggish through most of the morning. Cash index for 7/10 is listed at $145.08 down 1.67. Open interest Wednesday fell 537 positions (46,516).

LEAN HOGS:

Open: 10 cents to $2 higher. Volatility has quickly moved through livestock futures, with lean hog trade holding strong early morning gains. This has quickly and aggressively pulled back from sharp losses seen through the week, as buyers seem to be focusing on short covering opportunities. The market still remains very oversold, which may limit longer term direction, but is pushing prices sharply higher, with triple-digit gains in the first few minutes of trade. Cash hog trade Thursday is steady to $1.00 lower per cwt. Most bids are 50 cents to $1 lower. Open interest Wednesday fell 326 positions (230,909). Spot month July fell 978 positions (8,969) and August slipped 7,405 positions (56,127). Cash lean index for 7/10 is $81.52 down 0.15. DTN projected slaughter for Wednesday is at 457,000 head. Saturday runs are expected to be seen at 38,000 head.

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

(SK)

Rick Kment