DTN Before The Bell-Livestock

Hog Futures Tumble Lower

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

Sharp triple-digit losses have quickly developed in all livestock markets. This has posted limit losses in hog trade following a disappointing export sales report. Cattle futures continue to tumble lower with pressure in feeder cattle leading the weaker market shift. Corn markets are lower in light early trade. Stock markets are mixed. Dow Jones is 215 points lower with Nasdaq up 36 points.

LIVE CATTLE:

Open: 90 cents to $1.30 lower. Sharp triple-digit losses have continued to quickly move through the complex with softness midweek opening the door for additional aggressive liquidation and general market pressure. With nearby contracts quickly blowing through support levels over the last two sessions, traders remain uncertain of potential stability as June futures are now testing $117 per cwt levels. June futusres have not traded at these prices levels since the first week in June, and a move below $115.50 would set new 2019 lows. Needless to say, technical pressure seen over the last two trading sessions has quickly shifted markets out of the longstanding sideways trend, now traders are searching for underlying market support at the lower market levels. Cash cattle bids have developed in the north early Thursday morning following light to moderate trade in the South Wednesday. Bids are seen at $125 live and $205 to $206 dressed. This is well below asking prices of $130 live ang $212 dressed, and $1 to $2 per cwt lower than most trade Wednesday on a live basis. Cash business in the South may be done for the week, but needs to develop in the North. This may push any additional deals off until later in the week. Open interest Wednesday liquidated 7,023 positions (444,508). Spot month April contracts lost 2,167 positions (3,406) and June contracts slipped 4,679 positions (185,964). DTN projected slaughter for Thursday is 121,000 head.

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FEEDER CATTLE:

Open: $1 to $1.50 lower. Strong follow through pressure is quickly moving through feeder cattle futures once again. The technical shift lower seen Wednesday has sparked follow through liquidation with traders unwilling or unable to bring additional buyer interest back into the complex. There continues to be some additional outside market pressure from sharply lower lean hog trade Thursday morning. This may keep the underlying tone of the market bearish as traders watch to see just how far prices will shift lower before buyers are willing to step into the market. Cash index for 4/24 is $145.78 down $0.06. Open interest Wednesday added 571 positions (53,994).

LEAN HOGS:

Open: $2 to $3 lower. Sharp limit losses quickly flooded into most lean hog trade at opening bell following a disappointing export sales report. Not only were no new sales to China shown, a slight net reduction was posted. This clearly is not what the market has been expecting and searching for over the last few weeks. All of the anticipation on growing and consistent buyer interest from China seems to be in question at this point. Although swine fever continues to be a major issue, and this will continue to be a potential for increased moves, the main focus will be just how elastic the market will be through the end of the year. Even though China is the largest producer of pork and requires the largest demand, it is naĂŻve to assume that either consumers or the country as a whole will be able or willing to significantly increase costs to attain pork supplies. Market volatility over the demand from China will continue to be seen through the market with Thursday's weekly export sales report potentially becoming the measuring stick of weekly market direction. Cash hog trade is called 50 cents lower to $1 higher. Most bids are steady to weak. Open interest added 3,161 positions (311,594). June added 197 positions (79,760) and July added 1,717 positions (41,503). Cash lean index for 4/24 is $882.79 up $0.72. DTN projected slaughter for Thursday is 477,000 head. Saturday runs are expected at 141,000 head.

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

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Rick Kment