DTN Before The Bell Livestock

GENERAL COMMENTS:

Triple-digit gains have quickly and aggressively moved into spot live cattle trade as the focus on higher cash cattle trade through the week is helping to stimulate additional buyer support. Hog futures remain weak, but under limited selling volume as traders focus on the ability for packers to increase production levels. Corn prices are higher in light trade. Stock markets are lower. Dow Jones is 54 points lower with NASDAQ down 50 points.

LIVE CATTLE:

Open: Mixed. Strong underlying gains are quickly developing through spot June futures, although the tone of the market has continued to bounce back from previous losses over the past two days. The underlying support in spot prices remains focused on increased buyer support while very limited interest is developing in other nearby contracts. The concern that overall beef demand will not significantly improve from current levels, especially if retail prices start shifting higher in the near future has limited long-term buyer support through the entire complex. Cash cattle markets are quiet early Friday morning with bids hard to find at this point. It is expected that some additional trade will need to be seen before the end of the week, especially in the North. But given the early movement, and recent pullback in futures and beef values, it is uncertain how intent either side will be about moving additional cattle numbers. Asking prices are holding at $115 to $120 live in the South and $185 dressed in the North. Open interest added 670 positions (263,996). June contracts lost 4,811 positions (53,951) and August contracts added 2,286 positions (101,482). DTN projected slaughter for Friday is 94,000 head.

FEEDER CATTLE:

Open: Steady to $1 Higher. Firm buying has trickled into the feeder cattle futures complex Friday morning. Although there still remain significant concerns about the ability to push prices higher over the near future, the ability to regain price support and trade volume at the end of the week is a very positive sign. Although futures prices are still well above April lows, the concern of further erosion from recent gains is limiting not only the positive direction of the market, but the ability to draw additional trade interest into the market through the end of May. This could keep prices stuck within a moderate sideways trading pattern, and further limit volume in the complex. Cash index for 5/11 is $123.11, up 0.51. Open interest Thursday fell 498 positions (29,124).

LEAN HOGS:

Open: Steady to $1.50 Lower. Firm pressure is seen through the entire lean hog complex although trade volumes remain extremely light early Friday morning. The focus on increased trade before the weekend will be curbed by concern that additional widespread pressure in wholesale pork values may put further pressure on nearby futures contracts and overall cash values. Packers continue to focus on increasing production capacity, and are a far way from "normal" levels, but the improvements seen during the week has been impressive, giving more hope for further improvements during the upcoming days. But until the burdensome levels of market ready hogs start to clear up, the entire complex is likely to remain under pressure. At this point, there is little fear of moving below recent lows, but the concern of remaining stuck in a sideways pattern could limit further outside trade interest. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady. Open interest added 2,347 positions (209,509). June fell 3,229 positions (35,394) and July added 3,111 positions (56,725). Cash lean index for 5/12 is $67.89, up 2.17. DTN projected slaughter for Friday is 375,000 head. Saturday runs are expected near 249,000 head.

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

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