DTN Before The Bell-Livestock

GENERAL COMMENTS

Livestock trade is mixed to lower with cattle futures struggling to find direction, while hog trade has pointed to strong market pressure. This has continued to add uncertainty to the complex going into the long holiday weekend. Traders are looking for increased direction from outside markets with markets closed Monday for Memorial Day. Corn markets are higher in light early trade. Stock markets are higher. Dow Jones is 108 points higher with NASDAQ up 52 points.

LIVE CATTLE:

Open: Mixed. Narrow trading ranges have developed once again with traders seemingly coasting through the end of the week. There is not expected to be additional direction developing before the end of the session, although traders are looking for direction from the cattle on feed report which will be released later in the day. The expected shift higher in cattle on feed is likely to have a bearish tone to the market it the report shows as much increase as estimates expect. Either way, markets could see significant market shifts once traders return to the complex Tuesday. Cash cattle markets remain quickly following moderate to trade in all areas over the last two days. It is likely that business for the week is done, although a few clean up deals could still trickle into the market. There remains very limited overall direction in the complex as traders focus on growing long term supplies, but increasing seasonal demand. Open interest Wednesday added 2060 positions (381,855). Spot-month June contracts lost 2,267 positions (63,365) and August contracts added 1,639 positions (150,443). DTN projected slaughter for Thursday is 122,000 head.

FEEDER CATTLE:

Open: Mixed. Limited support is redeveloping in nearby feeder cattle trade with traders focusing on limited volume expected through the day Friday. With cattle on feed reports released later in the afternoon, some additional pre-report positioning is likely to develop. This may shift price levels over the next couple of days as the full impact of the report will not be traded until Tuesday next week. Currently early estimates are for cattle placements to be 14.4% above year ago levels. This sizable increase would likely spark market weakness next week no matter how much has been already factored into the complex. Cash index for 5/21 is $132.16 down $0.09. Open interest Wednesday gained 400 positions (51,236).

LEAN HOGS:

Open: $1 to $1.50 lower. Firm pressure is seen in lean hog trade early Friday morning as traders remain concerned about long term demand support from both export and domestic markets. The strong pullback in pork cutout values through the end of the week is creating additional concerns through the entire complex. With markets closed Monday for Memorial Day, additional end of the week adjustments are likely to develop Friday morning, potentially adding even more pressure to the complex. Cash hog trade is called steady to $1 lower with most bids steady. Open interest added 1,747 positions (313,595). June liquidated 956 positions (28,318) and July slipped 24 positions (76,767). Cash lean index for 5/22 is $84.36, down 0.03. DTN projected slaughter for Friday is 415,000 head. Saturday runs are expected near 41,000 head.

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

(CZ)

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