DTN Before The Bell-Livestock

Hog Prices Rally on China Sales

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

Sharp triple-digit gains flooded into hog trade following the export sales report which posted active sales to China. This sparked increased follow-through activity as many had expected China sales, but were still fearful that it may not develop. Cattle trade is firmly higher based on spillover buying from hog futures. Corn markets are mixed in light early trade. Stock markets are mixed. Dow Jones is 42 points higher with Nasdaq down 8 points.

LIVE CATTLE:

Open: Steady to 50 cents higher. Limited price support continues to hold in live cattle trade Thursday morning as buyers steadily moved back into the complex. The initial limit gains in lean hog trade helped to offset previous cattle market pressure, allowing noncommercial support to slowly trickle into the complex. There is expected to be some light but supportive buying develop through the morning with traders looking for additional direction from beef values. Cash cattle interest is expected to remain sluggish early Thursday morning following increased overall activity midweek. Packers are expected to become slightly more interested, but additional trade may not be seen until Friday. Open interest Wednesday fell 263 positions (443,345). Spot month April contracts lost 1,194 positions (22,182) and June contracts fell 1,845 positions (196,362). DTN projected slaughter for Thursday is 118,000 head.

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FEEDER CATTLE:

Open: Mixed. Early support quickly developed following the surge higher in lean hog trade. Even though traders seem to be trying to etch out their own path, the wide market swings in the hog complex make it hard not to follow along. Early support is starting to slowly erode as little market direction is seen in the entire cattle complex Thursday morning. Cash index for 4/9 is $143.50 up $0.20. Open interest Wednesday added 1,021 positions (50,981).

LEAN HOGS:

Open: $2 to $3 higher. Confirmation that China has been in the market buying pork has sparked aggressive buyer support through futures trade. The morning export sales report posted 96.5 metric tons sold and 46.6 mt shipped. This confirmed additional buyer activity through the complex, and sparked active gains. Lean hog futures posted limit gains at opening bell, but have since pulled back slightly as traders look for additional direction in the complex. This is expected to keep prices well supported through the entire complex as buyers look for additional confirmation of potential support through the next several days. Cash hog trade is called steady to $1 lower. Most bids are steady. Open interest added 4,598 positions (292,372). April added 68 positions (13,588) and June fell 523 positions (81,483). Cash lean index for 4/9 is $78.89 up $0.21. DTN projected slaughter for Thursday is 432,000 head. Saturday runs are expected at 68,000 head.

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

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Rick Kment