DTN Before The Bell-Livestock

Hog Futures Rally Higher

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

Firm follow-through pressure is seen across cattle trade as traders try to adjust to the moderate to strong losses seen over the last couple of days. The lean hog complex remains sharply higher with gains nearing $2 per hundredweight (cwt) seen in October contracts following limit gains seen on Thursday. Corn prices are lower in light trade. Stock markets are lower, Dow Jones is 178 points lower while Nasdaq is down 50 points.

LIVE CATTLE:

Open: Steady to 50 cents lower. Light-to-moderate follow-through selling has redeveloped in early trade Friday. The focus on sharp late-week losses that developed Thursday is adding some additional weakness to the entire complex. At this point, live cattle futures still remain in a sideways trading pattern given the strong support through the end of July. But continued pressure and softness developing in the feeder cattle markets could add some uncertainty to the complex, allowing for follow-through pressure to develop late in the week. Cash cattle interest is sluggish Friday morning following moderate-to-active trade in the North. Dressed trade was seen in a wide range from $174 to $179 dressed, and $109 to $112.50 lives, although most trade was seen at $175 to $176 per cwt dressed and $110 live. This is generally $2 to $3 per cwt lower than last week. Trade in the South remains undeveloped, but should spark some interest through the day Friday. But the weaker tone seems to have already been set given the pressure in futures trade. Asking prices are seen at $116 per cwt live basis, and $180 dressed. Open interest Thursday slipped 786 positions (301,939). Spot-month August contracts lost 1,475 positions (14,332) and October contracts gained 300 positions (131,676). DTN projected slaughter for Friday is 116,000 head.

FEEDER CATTLE:

Open: 50 cents to $1 Lower. Very limited support is expected to be seen early Friday morning following a combination of triple-digit losses Thursday and the inability to bring any buyer activity back into the market after opening bell Friday. The tone of the feeder cattle futures remains weak given the pullback below short-term support levels earlier in the week. Given the weakness in the market, there could be some short-covering that may develop later in the session as traders try to square positions before the end of the week. Cash index for 8/8 is listed at $150.45, down 0.11. Open interest Thursday lost 462 positions (52,734).

LEAN HOGS:

Open: $1 to $2 Higher. Following limit gains seen Thursday in October lean hog futures, aggressive buyer support has quickly flooded back into the market. The focus is on redeveloping market support following the extremely oversold status in the complex, even though no changes have yet been seen in market fundamentals. Nearby contracts are ranging from $1 to $2 per cwt higher with October contracts leading the market higher with a $1.90 per cwt rally. This may add some additional volatility to the market due to the fact that hog markets are trading with expanded trade limits through the rest of the week. Current limits will be set at $4.50 per cwt Friday, which may spark some additional widespread volatility through the complex. Cash hog trade Friday is $1 to $2 lower per cwt. Most bids are $1.50 per cwt lower. Open interest Thursday lost 5,275 positions (233,981). Spot-month August fell 1,739 positions (8,952) and October eroded 1,454 positions (117,721). Cash lean index for 8/8 is $61.88 down 1.29. DTN projected slaughter for Friday is at 440,000 head. Saturday runs are expected at 135,000 head.

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

(SK)

Rick Kment