DTN Before The Bell-Livestock

GENERAL COMMENTS

Hog futures have shifted lower once again with moderate to active buying seen Wednesday being quickly offset by triple-digit losses in nearby futures trade. Continued strength in corn prices has continued to add pressure to feeder cattle prices, and limiting support through the entire cattle market. Corn markets are higher in light early trade. Stock markets are higher. Dow Jones is 66 points higher with NASDAQ up 39 points.

LIVE CATTLE:

Open: Steady to 50 cents higher. Limited buyer support is slowly but steadily moving through live cattle trade. Lightly traded June futures are leading the shift higher with 50-cent gains Thursday, while August contracts are struggling to maintain steady price levels. Traders are attempting to build on the support levels set during the middle of May, although the continued pressure in feeder cattle trade and surging grain trade has kept most traders on the sidelines through the end of the month. August futures remain bookmarked in a short-term trading range between $107 and $109 per cwt. Although it would not take significant market shifts to break out of this pattern, the inability to spark any sense of significant interest seems monumental at this point. Cash cattle bids have redeveloped in most areas with live bids seen from $115 to $116, while dressed bids in the North remain steady with Wednesday at $185 per cwt. The light trade seen Wednesday in the South confirmed price levels at $115 per cwt, and without a major disruption in futures trade or beef values through the end of the week, this is expected to set the tone of the market, at least in the South. It appears that the rest of cattle markets have a strong desire to finish business earlier than later, but there still remains a moderate gap between bids and asking prices. Asking prices remain at $117 and higher live and $188 and higher dressed. Open interest Wednesday slipped 1,769 positions (376,935). Spot month June contracts lost 4,724 positions (49,876) and August contracts slipped 446 positions (150,981). DTN projected slaughter for Thursday is 122,000 head.

FEEDER CATTLE:

Open: Mixed. Narrow losses have slowly but steadily developed through feeder cattle trade with the double-digit morning bounce in corn prices once again putting the emphasis on production costs associated to feed prices. The overall strength in grain trade will continue to weaken feeder cattle prices in futures and cash markets through the end of the month. Cash index for 5/27 is $136.55 up $0.50. Open interest Wednesday fell 442 positions (50,140).

LEAN HOGS:

Open: 50 cents to $2 lower. Strong underlying pressure has quickly and aggressively moved through lean hog trade in the opening minutes of trade with traders focusing on the inability to sustain midweek gains. The recent surges in corn prices, and expectations that continued weather delays will push prices higher has turned trade focus away from the global supply and demand markets, and back to local production costs. July corn futures have rallied 80 cents in the last three weeks. Combined with aggressive moves higher in soybean and soybean meal markets, overall production costs of pork have rallied higher, creating additional concerns through the entire complex with overall market prices unable to keep up. This may add increased overall pressure through not only the hog complex, but the entire livestock market. Cash hog trade is called steady to $2 lower with most bids 50 cents to $1 lower. Open interest added 1,769 positions (318,774). June liquidated 2,041 positions (22,262) and July gained 446 positions (80,279). Cash lean index for 5/28 is $83.31, down 0.71. DTN projected slaughter for Thursday is 470,000 head. Saturday runs are expected near 250,000 head.

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

(CZ)

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