DTN Before The Bell-Livestock

Pressure Continues in Hog Complex

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

Light to moderate pressure is quickly developing across most livestock trade as traders in cattle markets try to adjust positions following the strong market rallies which developed Wednesday. Hog futures remain unsupported as traders continue to test contract lows through early August. Corn prices are higher in light trade. Stock markets are lower, Dow Jones is 174 points lower while Nasdaq is down 26 points.

LIVE CATTLE:

Open: Mixed. Initial trade is mixed to mostly lower with most contracts holding losses of 5 to 20 cents per cwt. The overall lack of direction in the live cattle markets following the strong support seen Wednesday is pointing toward the likelihood that additional buying activity is just around the corner, but limited trade volume Thursday morning may limit interest at this point. Cash cattle activity is expected to increase through the day with very the first half of the week at a near standstill, leaving additional interest to develop through the next couple of days. Even though most trade may easily be delayed until sometime Friday, packers are expected to become more active through the day. Bids are likely to develop near $109 live and $172 and higher dressed. Asking prices are expected to redevelop near $114 and higher live and $182 per cwt dressed. Open interest Wednesday slipped 837 positions (308,983). Spot month August contracts lost 4,801 positions (31,108) and October contracts fell 182 positions (127,816). DTN projected slaughter for Thursday is 120,000 head.

FEEDER CATTLE:

Open: 40 to 80 cents lower. Early position taking is quickly developing in feeder cattle futures as traders try to take advantage of the very limited trade volume Thursday morning and adjust from the sharp gains which developed late in the day Wednesday. At this point it is uncertain if follow-through pressure will continue to develop, or if this push lower will be short lived. Traders have a desire and tendency to look for market firmness in the near future which could help to redevelop buyer support over the nearby futures and push prices higher through the end of the week. But the limited interest could spark another late week round of protection taking in nearby contracts. Cash index for 7/31 is listed at $149.39 up 0.35. Open interest Wednesday fell 1,081 positions (53,665).

LEAN HOGS:

Open: 20 to 60 cents lower. Lean hog futures have an uncanny inability to bring buyers back into the market as initial trade is seen 20 to 60 cents lower with the most aggressive pressure developing nearby trade. August through December futures are holding losses from 40 to 60 cents lower as the overall weakness in cash hog values and lack of underlying support in pork values based on demand uncertainty is eroding trader confidence. So far, trade has remained extremely light, which may allow for moderate short covering to develop later in the session. But the underlying tone of the market remains weak with traders looking for additional market direction. Cash hog trade Thursday is $1 to $2.50 lower per cwt. Most bids are $2 per cwt lower. Open interest Wednesday added 1,483 positions (241,801). Spot-month August fell 1,402 positions (19,095) and October gained 275 positions (119,365). Cash lean index for 7/31 is $69.98 down 0.82. DTN projected slaughter for Thursday is at 452,000 head. Saturday runs are expected at 78,000 head.

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

(SK)

Rick Kment