DTN Before The Bell-Livestock

GENERAL COMMENTS

Moderate to strong pressure is seen through livestock trade with triple-digit losses seen in lean hog and feeder cattle trade. The focus on pork cancellations from China is being met by sharp gains in corn prices. Limited volume is expected to be seen through the rest of the week as traders focus on adjusting markets following the recent price swings. Corn markets are higher in light early trade. Stock markets are higher. Dow Jones is 174 points higher with Nasdaq up 50 points.

LIVE CATTLE:

Open: Mixed. Light to moderate pressure is starting to redevelop in live cattle trade as triple-digit losses in feeder cattle is starting to erode previous market stability. Summer contracts are leading the market lower with prices 30 to 40 cents per cwt lower in early trade, although there seems to be limited interest in pushing prices significantly lower due to the already depressed market levels. A move below $109 per cwt in June futures through the session could spark additional market pressure, although volume is expected to remain limited through the rest of the week. Cash cattle activity remains light early Thursday morning with just a few bids developing in the North at $115 per cwt live and $185 dressed. Following light to moderate trade at $117 per cwt in the South, activity in the South may be done for the week. Trade in the North will likely develop over the next couple of days, but the weaker tone in the market is expected to carry through remaining trade activity. Open interest Wednesday added 1,074 positions (380,944). Spot month June contracts lost 6,512 positions (83,561) and August contracts added 5,103 positions (139,964). DTN projected slaughter for Thursday is 122,000 head.

FEEDER CATTLE:

Open: $1 to $1.50 per cwt. Moderate to strong pressure is moving through the entire cattle complex with feeder cattle trade posting triple-digit losses despite expected long-term support through the complex. Active buying interest once again in corn prices has continued to put price pressure on feeder cattle trade with traders focusing on the impact to cash markets due to higher production costs. August futures are holding $1.20 per cwt losses, moving to $141 per cwt, which is once again setting contract lows, and testing long-term support levels in continuous charts. Lack of interest given the strong supply levels and higher production costs may add to selling pressure through the rest of the week. Cash index for 5/14 is $134.81 down $0.26. Open interest Wednesday added 607 positions (50,738).

LEAN HOGS:

Open: Steady to $1 lower. Firm market pressure is moving into lean hog trade following a bearish export sales report where China canceled previous sales of 3,200 metric tons. This is not a significant surprise given the overall turmoil in trade relations between the two countries, although traders had hoped that in spite of increased tariffs and overall trade uncertainty, that the need to secure pork would still post increased sales. This could add follow-through weakness through the lean hog complex, although traders still remain focused on long term global demand strength. Initial losses are likely to spark additional market weakness as more volume moves into the complex. Cash hog trade is called $1 lower to $1 higher with most bids steady. Open interest added 2,644 positions (309,030). June liquidated 3,147 positions (38,304) and July gained 3,091 positions (70,821). Cash lean index for 5/14 is $83.67 up $0.40. DTN projected slaughter for Thursday is 465,000 head. Saturday runs are expected at 74,000 head

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

(BAS)

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