DTN Before The Bell-Livestock

Limit Gains Possible In Hog Trade

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

Sharp gains have flooded the lean hog complex focusing on the ability to bring additional momentum back into the complex. Cattle markets are mixed to generally weak following a negative cattle on feed report last Friday. Corn prices are lower in light trade. Stock markets are higher, Dow Jones is 141 points higher while Nasdaq is up 38 points.


Open: Mixed. Despite the fact that overall cattle on feed levels are well above year ago levels, traders seem to be taking the report results in stride early Monday with pre-report projections matching report numbers. This is allowing for some mixed trade early in the session as traders had already set positions last week ahead of the report. The expectation that the overall report would be negative, led to moderate to strong triple-digit losses on Friday. This is helping to bring some buyers back into the market in nearby trade as they focus on short covering. Deferred contracts are still posting additional pressure, which is holding losses of 5 to 50 cents per cwt as traders account for the larger than expected cattle placement numbers. Cash cattle activity is moving into the week following light to moderate trade, which trickled into the market through the last half of the week. With the long holiday weekend approaching, it is expected that trade will remain sluggish once again. Although both sides are expected to try to wrap things up before late Friday, it is very possible that interest will not strongly develop until the last half of the week. Open interest Friday added 1,804 positions (297,336). Spot month August contracts lost 1,134 positions (2,508) and October contracts added 354 positions (124,220). DTN projected slaughter for Monday is 119,000 head.


Open: 20 to 50 cents lower. Light trade is seen in feeder cattle futures Monday following the bearish cattle on feed report. Total placements in July increased 8% over year ago levels, which is also nearly 2% ahead of early report projections. The point is that overall cattle will be readily available for an extended period of time, and this trend does not seem to be changing anytime soon. Most of the bearishness in the market has already been factored into the complex as traders looked for an increased placement in July, but just not quite this large. Sluggish trade is expected to be seen through most of the session, which may add some uncertainty to the entire complex. Cash index for 8/23 is listed at $150.85, up 0.21. Open interest Friday added 876 positions (49,797).


Open: $1 to $2.70 higher. Sharp gains have exploded through lean hog futures early Monday morning with the aggressive market moves pushing nearby contracts $2 to $2.70 per cwt higher in October through February futures trade. The focus on a strong close late last week that sparked renewed buyer support in deferred lean hog trade Friday afternoon has helped to bring about increased overall support through the entire complex. These latest moves, if buyer support can hold may easily lead to limit-higher trade early in the session and set the tone or a bullish week ahead of the holiday break. Cash hog trade Monday is expected steady to $1 lower per cwt. Bids appear to be scattered throughout the range. Open interest Friday added 740 positions (224,799). Spot month October fell 979 positions (105,481) and December added 441 positions (58,466). Cash lean index for 8/23 is $48.93 down 0.57. DTN projected slaughter for Monday is at 468,000 head.

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


Rick Kment