DTN Before The Bell-Livestock

Narrow Initial Market Shifts Limit Trade Activity

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

Mixed trade has slowly developed in most livestock trade as early week adjustments seem to be the main order of business through the morning. Feeder cattle and live cattle markets are holding light to moderate weakness in nearby trade, while deferred futures are showing slightly more support. The ability to bring buyers back into the lean hog complex based on short covering activity while the tone of the market remains weak, may add some market volatility to the entire complex Monday. Corn prices are higher in light trade. Stock markets are lower, Dow Jones is 25 points lower while Nasdaq is down 36 points.

LIVE CATTLE:

Open: Steady to 40 cents lower. Narrow losses have slowly trickled into live cattle futures Monday morning as traders try to sort out the late developing cash market trade last week as well as the cattle on feed numbers which were pegged by pre-report estimates. Nearby futures are holding losses of 10 to 15 cents per cwt, as traders are unwilling to move too far away from the most recent market activity with little to no strong market indication of what else may develop through the next couple of days. Outside market direction is expected to be taken into account through most of the day, which could shift trade activity through most of the morning. Cash cattle interest is expected to remain quiet Monday following trade last week not fully developing until mid to late afternoon Friday. Even though the late trade helped to push prices higher, packers are still expected to be short bought, which may spark some interest earlier in the week than has been seen over the last few weeks. Open interest Friday slipped 2,600 positions (317,963). Spot month August contracts lost 3,581 positions (63,138) and October contracts fell 740 positions (120,893). DTN projected slaughter for Monday is 118,000 head.

FEEDER CATTLE:

Open: Mixed. Pressure is redeveloping in nearby contracts with traders taking into account the cattle on feed report which confirmed pre-report estimates. The overall weakness seen in the market is a result of a 0.5% lower placement level than was expected. Although total placements are still 1% over year ago levels, most of this has already been factored into the market. Narrow gains are slowly developing across the complex Monday morning with traders looking for increased overall support through the complex as demand strength is likely to overshadow placement levels through the end of the year. Cash index for 7/19 is listed at $148.02 down 0.29. Open interest Friday added 726 positions (51,537).

LEAN HOGS:

Open: Mixed. Light initial buyer support has trickled into nearby lean hog futures Monday morning. The overall weaker tone of the lean hog futures complex over the last couple of weeks has added some concern about the ability to bring increased pressure early in the session. Nearby contracts are holding gains from 5 to 15 cents per cwt, while deferred futures is steady to slightly lower. Trade volume remains sluggish in the first few minutes of trade, but is expected to pick up momentum through the next couple of hours as more traders filter back into the complex following the weekend break. Cash hog trade Monday is $1.00 to $2.00 lower per cwt. Most bids $1 lower. Open interest Friday added 1,295 positions (231,839). Spot month August fell 1,987 positions (33,249) and October gained 1,706 positions (112,621). Cash lean index for 7/19 is $77.83 down 0.79. DTN projected slaughter for Monday is at 420,000 head.

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

(SK)

Rick Kment