DTN Before The Bell-Livestock

GENERAL COMMENTS

Hog futures remain most active early Wednesday morning as triple-digit losses have been renewed in deferred contracts. The long-term pressure in the hog complex is adding to the underlying weakness of the entire complex. Cattle trade is mixed in a narrow range due to limited activity. Corn markets are higher in light early trade. Stock markets are lower. Dow Jones is 2 points lower with NASDAQ down 19 points.

LIVE CATTLE:

Open: Mixed. Live cattle trade remains caught between strong previous gains, and building weakness in feeder cattle trade. Prices are hovering from 30 cents lower to 20 cents higher during early trade, as traders are looking for increased volume and the potential to spark additional longer-term support through the beef complex. Not only will outside markets be a major player in the overall direction of trade, but cash and boxed beef values will also create additional volatility through the remainder of June. Cash cattle interest remains sluggish with bids and asking prices generally undefined Wednesday morning. It is expected that more interest will develop through the day, but at this point uncertainty about developing midweek trade is seen. Open interest Tuesday reduced 3,415 positions (360,208). Spot month June contracts lost 1,081 positions (16,227) and August contracts fell 2,662 positions (154,082). DTN projected slaughter for Wednesday is 122,000 head.

FEEDER CATTLE:

Open: Steady to 40 cents lower. Follow through pressure is moving through the feeder cattle trade with increased softness seen in all contract months early Wednesday morning. Sharp corn market gains Tuesday and follow through buying early Wednesday is putting the focus back on increased production costs. Feeder cattle markets are most directly impacted by feed costs as cost of gains and break-evens are used when calculating purchase prices of feeder cattle. The overall concern of tight corn supplies will continue to be an issue through the next year, putting even more pressure on all cattle trade. Cash index for 6/10 is $132.91 up $0.65. Open interest Tuesday lost 250 positions (48,144).

LEAN HOGS:

Open: Steady to $1.80 Lower. Firm follow-through pressure is developing through the entire lean hog futures complex with traders focusing on additional sharp losses in October and December contracts. Traders have now pushed fourth-quarter futures to $75 per cwt, sparking additional long-term concerns surrounding export demand tensions and growing production costs. The focus on reduced corn production during the year will have as much or more of an impact on late 2019 and 2020 hog prices as it will on nearby activity. This will continue to be the focus due to strong domestic demand helping to keep nearby futures generally supported over the next couple of months. Cash hog trade is called steady to $1 lower with most bids steady. Open interest fell 2,130 positions (312,913). June liquidated 1,515 positions (10,656) and July lost 5,429 positions (55,423). Cash lean index for 6/10 is $79.66, down 0.29. DTN projected slaughter for Wednesday is 478,000 head. Saturday runs are expected at 68,000 head.

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

(CZ)

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