DTN Before The Bell-Livestock

Sharp Losses Flood Through Hog Trade

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

Hog futures continue to shift lower following limit losses Thursday. Traders are taking advantage of expanded trading limits with July through December contracts holding losses for $3.50 to $4.25 per cwt. The overall lack of support in the entire complex could add further losses through the end of the month. Cattle markets are sluggish in limited activity Friday morning. Corn markets are lower in light early trade. Stock markets are higher. Dow Jones is 105 points higher with Nasdaq up 40 points.

LIVE CATTLE:

Open: Mixed. Limited activity and narrow trading ranges seem to be the focus in live cattle markets Friday morning. At this point, with hog trade posting aggressive losses and expanding trade limits, cattle traders seem to be willing to just duck for cover and stay out of the firing line in the neighboring hog market. The limited narrow gains seen at opening bell may find it hard to hold given the overall bearishness of surrounding markets. Cash cattle activity remains quiet with bids undeveloped through the morning Friday. At this point, it appears that trade may be finished for the week, although overall trade seen on Wednesday appears to be lighter than what is expected. Bids may not develop as both sides may be content holding current levels into the month of April. Open interest Thursday fell 523 positions (444,320). Spot month April contracts lost 2,374 positions (44,939) and June contracts slipped 599 positions (203,805). DTN projected slaughter for Friday is 118,000 head.

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FEEDER CATTLE:

Open: Mixed. Limited direction is seen through the entire feeder cattle complex with traders mixed from 15 cents lower to 5 cents higher in limited activity. Traders seem to be focusing on end-of-month and -quarter positioning, with all other markets the central focus Friday. Aggressive follow-through pressure in hog trade, as well as anticipation of the USDA crop reports has most traders paying little attention to the cattle complex Friday. Cash index for 3/27 is $142.35 up $0.20. Open interest Thursday added 525 positions (53,807).

LEAN HOGS:

Open: $1 to $4 lower. Widespread market losses have quickly and aggressively developed through the morning with losses reaching $4.22 per cwt in late 2019 contracts, taking advantage of the expanded trading limits in several contracts. Concerns of demand growth and the ability to fill the Chinese market with domestic pork has allowed for market volatility through the entire complex. But the surge higher during the last couple of weeks has left the complex overbought and ripe for a market correction. Even if markets close limit lower Friday, this will still not trigger any technical reversal due to the extreme market surge previously seen in the complex. Cash hog trade is steady to $2 higher. Most bids are expected steady Friday morning. Open interest added 152 positions (284,318). April fell 1,383 positions (24,988) and June fell 8 positions (84,040). Cash lean index for 3/27 is $71.72 up $2.22. DTN projected slaughter for Friday is 462,000 head. Saturday runs are expected at 146,000 head.

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

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Rick Kment