DTN Before The Bell-Livestock

GENERAL COMMENTS

Outside markets lean bearish early Tuesday with Dow Jones futures trading down 178 points early and most other commodities trading lower, still stunned by the unresolved trade dispute with China.

LIVE CATTLE:

Open: 22 cents higher. June cattle are up $0.02 early, showing hints of possible support near the old November low of roughly $112.00. Now that prices are more than $12.00 below their high in March, it is reasonable to expect better demand as the economy is faring well and one of these days we'll see more enticing cookout weather. Cash cattle are not likely to trade much Tuesday, but if they do the prices are apt to be lower after Monday's lower futures trade, following cash prices that were $3 to $5 lower last week. Cattle and feeder prices are both under bearish pressure now that winter weather threats have eased and supplies seem to be flowing more easily. We cannot minimize how the noncommercial position of record high net longs built over the winter has started to unravel and at 145,697 contracts, there is still plenty to liquidate. Dow Jones projected Tuesday's cattle slaughter at 122,000 after USDA estimated Monday's slaughter at 119,000. Total open interest was down 8,025 to 302,449 on Monday's lower trade. June contracts fell 7,053 to 136,919 and August fell 562 to 111,851.

FEEDER CATTLE:

Open: 65 cents higher. August feeder cattle are up $0.02 early, not yet maintaining the bullish enthusiasm of the opening price or inspiring confidence among potential buyers after dropping roughly $17.00 in less than three weeks. August feeder cattle prices are coming off of an adverse weather-inspired high in mid-April, which caught noncommercials net long at the top. Monday's close set a new contract low, which makes $135 the next candidate. The Feeder Cash index for May 3 is listed at $137.41, down $7.58 from a week ago. Total open interest declined 793 to 49,443 on Monday's new contract low.

LEAN HOGS:

Open: $1.02 lower. June hogs are down $4.30 early Tuesday, quickly adding to Monday's limit-down move after President Donald Trump threatened China with more tariffs on Sunday. As bearish as tariffs are for U.S. ag products, noncommercial traders were net long hogs on the premise that China would be buying more U.S. pork to mitigate the damage of African swine fever. That puts noncommercials in a vulnerable bind now, needing to liquidate to limit their losses. It remains to be seen just how much pork China will buy. Summer futures prices narrowed to $6 to $7 above cash hog prices and pork cutout values and that wide spread is likely to remain under pressure this week. Dow Jones projected Tuesday's hog slaughter at 472,000 after USDA estimated Monday's slaughter at 470,000. The Lean Hog Index for May 3 was estimated at $79.98 down $3.48 from a week ago. Cash hog trade is expected to be lower early Tuesday, while pork carcass values held roughly steady last week. Total open interest was up 193 to 313,786 on Monday's limit-down move. Open interest in the June contract fell 760 to 75,309 while August contracts were down 390 to 38,295.

Todd Hultman can be reached at Todd.Hultman@dtn.com

(BAS)

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