DTN Before The Bell-Livestock

Initial Gains Quickly Fade Monday

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

Active early morning trade is seen across the livestock futures complex with prices bouncing in a wide market shift. Strong morning gains quickly developed, but this initial support appears to be much thinner than expected with prices eroding through the first few minutes of trade. Mixed trade is likely to be seen through most of the morning as trades try to cover positions from last week, but technical pressure remains firm in most contracts. Corn markets are higher in light early trade. Stock markets are lower. Dow Jones is 41 points lower with NASDAQ down 57 points.

LIVE CATTLE:

Open: Mixed. Limited interest is seen Monday morning as traders who liquated positions at the end of May are returning to the complex, allowing for a light to moderate correction to develop in the first few minutes of trade. But it appears that buyer support remains thin and may quickly allow markets to shift lower in later day trade. The focus on increased underlying pressure continuing through the month of June is likely to add additional uncertainty to the complex and bring about increased liquidation. Cash markets are quiet at this point with asking prices and bids unavailable. Most of the activity Monday is expected to be show list distribution and early week inventory taking. Open interest Friday added 3,066 positions (377,286). Spot month June contracts lost 1,086 positions (46,841) and August contracts added 464 positions (151,311). DTN projected slaughter for Monday is 121,000 head.

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FEEDER CATTLE:

Open: 50 cents to $1.50 higher. Strong initial gains moved into feeder cattle trade early Monday morning in an attempt for traders to cover short positions seen through the end of last week. With prices falling nearly $10 per cwt over the last three trading sessions, the opportunity for a market correction remains strong as buyers try to stabilize the market through early June. Continued concern surrounding recent gains in corn markets and long term availability of feed is still a major concern in the feeder cattle trade which will loom over market prices over the near future. Initial gains have started to fade through the early minutes of activity Monday, but gains continue to hold in most contracts at this point. Cash index for 5/30 is $132.47 down $2.53. Open interest Friday fell 88 positions (50,445).

LEAN HOGS:

Open: Steady to $1 higher. Firm underlying buying moved back into lean hog trade at opening bell. With a new month on the table, traders are willing to move back into the complex following the significant pressure seen through the complex over the last couple of weeks. But traders remain concerned about long-term pork demand which is starting to erode initial gains as more traders move back into the complex. It is uncertain if follow-through support will be able to be maintained through the next few days as concerns surrounding the trade war with China will continue to leave many traders looking for pressure through the summer months. Cash hog trade is called steady to $1 lower with most bids steady. Open interest lost 1,101 positions (315,608). June liquidated 1,549 positions (18,380) and July liquidated 1,652 positions (78,506). Cash lean index for 5/30 is $81.92, down 0.30. DTN projected slaughter for Monday is 477,000 head.

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

(CZ)

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Rick Kment