DTN Before The Bell-Livestock

GENERAL COMMENTS

Livestock futures remain mixed in a narrow trading range with follow through buyer support moving through lean hog trade, while cattle traders are adjusting positions following the strong market rally which developed Tuesday. The tone of the market remains firm, which may allow for increased buyer interest as the session progresses. Corn markets are lower in light trade. Stock markets are higher. Dow Jones is 178 points higher with NASDAQ up 82 points.

LIVE CATTLE:

Open: Steady to 30 cents lower. Limited activity is seen in live cattle trade early Wednesday morning with prices holding light to moderate pressure in the opening minutes of trade. This market shift is expected to be based on market adjustments, rather than a change in short or long term direction of the market following strong upward movement in the complex over the last week. Traders will also closely watch wholesale beef values Wednesday to determine if buyer support will develop following the strong shift lower seen Tuesday. Cash cattle activity remains quiet early Wednesday morning with bids and asking prices still hard to pin down. It is expected that more direction will develop from both sides through the day, but this may not be enough to spark trade interest following the active futures price support earlier in the week. The potential for light trade developing by the end of Wednesday still exists, but it is likely that most trade will be pushed off until later in the week. Open interest Tuesday fell 8,454 positions (336,501). Spot month August contracts lost 12,062 positions (103,184) and October contracts added 3,071 positions (116,808). DTN projected slaughter for Wednesday is 118,000 head.

FEEDER CATTLE:

Open: Mixed. Limited activity is seen early Wednesday morning in feeder cattle futures with prices hovering in narrow, single-digit trading ranges as traders return to the complex following triple-digit gains Tuesday. Although the tone of the market remains firm with technical support developing through the entire complex, a mixture of follow-through buying and position taking is seen due to very limited volume during the first few minutes of trade. Cash index for 7/8 is $135.44, up 1.07. Open interest Tuesday fell 532 positions (49,636).

LEAN HOGS:

Open: Steady to $1 higher. Moderate to firm buyer support moved back into the lean hog complex. Traders quickly and aggressively moved into the complex Tuesday, moving August through December contracts limit higher. The underlying firmness seen in the complex is helping to regain market interest as traders were previously oversold, looking for an active market correction. The potential to string together two or three strong market gains in a row will go a long way in changing the direction of the complex and break out of the previous weaker tone in the market. The complex still remains in the bottom end of the trading range, leaving it vulnerable for market pressure, but with prices at current levels, there remains more upside momentum available in the complex. Cash hog trade is called steady to $1 lower, with most bids steady to weak. Open interest fell 2,994 positions (287,372). July fell 1,597 positions (14,243) and August lost 4,237 positions (70,245). Cash lean index for 7/8 is $71.25, down 0.67. DTN projected slaughter for Wednesday is 477,000 head. Saturday runs are expected at 38,000 head.

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

(CZ)

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