DTN Before The Bell-Livestock

Feeder Cattle Futures Tumble Lower

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

Strong triple-digit losses have swept through feeder cattle and lean hog futures trade. This lack of support may continue to limit buyer activity through the rest of the morning as prices in these markets have continued to break through support levels. Corn prices are higher in light trade. Stock markets are lower, Dow Jones is 36 points lower, while Nasdaq is down 9 points.

LIVE CATTLE:

Open: 30 to 50 cents lower. The sharp losses in feeder cattle futures, as well as continued pressure in the hog complex, has brought back increased concerns of widespread market pressure. Even though live cattle futures are showing only moderate pressure compared to the rest of the complex, concerns of further weakness is keeping traders cautious. This could add to midday losses through the rest of the complex, with increased overall pressure developing through morning trade. Cash cattle activity remains sluggish with token bids stepping into the complex at $110 live basis through the South. This is well below asking prices of $116 per cwt and indicates that there is still a long way to go before an agreement is reached. This could keep markets untraded until later in the week, with Friday trade a strong possibility. Open interest Tuesday slipped 80 positions (301,636). Spot month August contracts lost 1,257 positions (16,708) and October contracts slipped 799 positions (129,714). DTN projected slaughter for Wednesday is 119,000 head.

FEEDER CATTLE:

Open: $1 to $1.50 lower. Sharp losses have quickly developed once again across feeder cattle trade as markets have hit triple-digit losses in the first few minutes after opening bell. The combination of losses over the last two sessions has broken through short-term support levels, which is creating additional questions of just how much follow through liquidation will develop in the near future. There remains the potential for fundamental support in the complex, although traders are unwilling to step into the market at this point given the aggressive momentum seen over the last two trading sessions. Cash index for 8/6 is listed at $150.06 up 0.32. Open interest Tuesday gained 1,320 positions (55,170).

LEAN HOGS:

Open: 80 cents to $1 Lower. Strong pressure has redeveloped across the lean hog complex with increased overall pressure sweeping the market following losses early in the week. The turn lower has once again set contract lows in several nearby contracts and is concerning due to the inability to hold the narrow support levels, which have developed during early August. The overall tone of the market remains extremely weak with the push for lower prices likely to spark some additional liquidation due to traders uncertain of market support in the near future. Cash hog trade Wednesday is $1 to $3.50 lower per cwt. Most bids are $2 per cwt lower. Open interest Tuesday slipped 761 positions (240,296). Spot month August fell 1,837 positions (11,161) and October fell 302 positions (119,742). Cash lean index for 8/6 is $64.64 down 1.40. DTN projected slaughter for Wednesday is at 462,000 head. Saturday runs are expected at 132,000 head.

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

(SK)

Rick Kment