DTN Before The Bell-Livestock

Hog Futures Lead Complex Higher

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

Firm gains are seen early Tuesday morning following renewed buyer activity quickly moving into lean hog and feeder cattle trade. Technical support is developing in lean hog futures, following the bounce off of market lows last week. This may continue to spark renewed buyer support, although upside price potential remains limited above $85 per cwt. Corn markets are lower in light trade. Stock markets are higher. Dow Jones is 341 points higher with NASDAQ up 148 points.

LIVE CATTLE:

Open: Mixed. Light to moderate gains are developing in most live cattle futures with June futures the only contract holding narrow losses. There is expected to be increased buyer support seen as the morning continues based on the rebound in feeder cattle. With August live cattle futures remaining within the current market range seen over the last month, it is likely that prices will continue to limited by the previous market boundaries with little fundamental or technical shift breaking out of this choppy pattern. Cash cattle interest remains sluggish with bids and asking prices yet to develop. The firmness in futures trade over the last couple of days should give feeders increased confidence, allowing them to stick to their price levels later in the week. Open interest Monday gained 636 positions (354,045). Spot month June contracts lost 1,015 positions (11,366) and August contracts added 836 positions (150,756). DTN projected slaughter for Tuesday is 121,000 head.

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FEEDER CATTLE:

Open: 80 cents to $1 higher. Firm follow through buyer support is quickly moving back into the feeder cattle trade. Early pressure in corn prices Tuesday has sparked active gains in most contracts with September through November prices holding triple-digit gains. The focus on grain market stability will continue to be a major issue through all cattle trade, but especially feeder cattle futures through the next couple of weeks. Even with corn prices at the current level, it is expected that higher production costs have already been factored into the feeder cattle market. But traders remain less certain of long-term impacts of reduced corn production and how this will affect prices in late 2019 and early 2020. Cash index for 6/14 is $133.55 down $0.70. Open interest Monday added 109 positions (48,462).

LEAN HOGS:

Open: Steady to $1 higher. Early buyer interest has quickly moved back into lean hog futures trade Tuesday morning. The uniform support in all livestock trade is helping to bring increased trade momentum to the complex as active support of 90 cents to $1.10 per cwt is seen in most nearby contracts. This move over the last two trading sessions is helping to quickly establish support levels near $80 per cwt in August futures. The ability to hold this price level and bring additional noncommercial support back to the market, could quickly spark renewed long-term support. Over the last three months traders have been trying to find a reasonable market bottom given the current uncertainty with China trade and growing world demand. It may be that $80 per cwt is that level in order to rebuild market confidence through the entire hog complex. Cash hog trade is called steady to $1 lower with most bids steady. Open interest added 559 positions (308,675). June reduced 2 positions (9,158) and July lost 2,903 positions (37,006). Cash lean index for 6/14 is $79.27, down 0.19. DTN projected slaughter for Tuesday is 476,000 head.

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

(CZ)

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Rick Kment