DTN Before The Bell Livestock

GENERAL COMMENTS:

Mixed trade is seen early Tuesday with light to moderate activity seen in cattle trade, while lean hog futures are holding light to moderate gains. The narrow price movements as traders move into the complex could help to add stability to the market, which may point to additional gains through the rest of the day. Corn futures are trading higher in light trade. Stock markets are mixed in limited morning trade. Dow Jones is 168 points lower with NASDAQ up 11 points.

LIVE CATTLE:

Open: Steady to 60 cents lower. Light uniform pressure is seen through the entire complex with nearby contracts holding losses of 50 to 60 cents per cwt, while less movement is seen in deferred contracts. The recent market support in all contracts has allowed traders some room to take positions and adjust for further potential gains in the near future. The swift shift lower in boxed beef prices seems to be adding some stability to the market, as most traders were already discounting the recent surge in wholesale beef values as "unrealistic." If beef prices come back in line with cattle and retail beef values, it is likely that limited support may once again develop as increased trader volume will return to the complex. Cash cattle activity remains quiet Tuesday morning with bids still hard to pin down, while asking prices are holding around $120 live and $200 dressed. The trend higher in the last few weeks is sparking renewed support through the complex with more focus on potential packer needs as they gain processing speeds through the upcoming weeks. It may be the last half of the week before active trade is seen, although the trend of trickling trade through the week seems to be gaining momentum, potentially allowing for some movement seen before midweek. Open interest fell 2,568 positions (258,056). June contracts lost 4,676 positions (41,956) and August contracts added 319 positions (103,564). DTN projected slaughter for Tuesday is 96,000 head.

FEEDER CATTLE:

Open: Mixed. Spot May futures are holding a firm 70 cent gain, although the rest of the complex has shifted moderately lower due to early morning positioning seen through the entire market. Although August futures are now the most active contract, the May contract still carries some weight despite the limited volume as this gives the best indication of late spring market direction in feeder cattle futures. The wide range of cattle placements during April for Friday's cattle on feed report gives very little confidence of where overall placements will fall. Everyone is on the same page in the expectations that placements will be much smaller than year ago levels but just how much smaller is the current debate. This could lead to moderate price adjustments in the coming days. Cash index for 5/15 is $125.73, up 0.93. Open interest Monday fell 347 positions (29,424).

LEAN HOGS:

Open: Steady to 50 cents higher. Light buyer support is slowly but steadily moving into lean hog futures trade. The focus on increased processing speed in the packing industry is helping to calm additional fears of further additional market pressure. There may be some additional narrow to moderate moves as traders continue to look for direction from cash prices as well as overall wholesale pork prices. But as daily slaughter number inch closer to the 400,000 head threshold, more confidence seems to be built through the market. There is nothing magical about the 400,000 level, but an even benchmark seems like it will create a significant overall mental signal that the industry is well past its market lows, and quickly moving back to a more normal schedule. Although getting back to pre-covid levels may still not be attainable in the near future due to changes made in processing plants to create distance between workers. Cash hog trade is called $1 lower to 50 cents higher. Most bids are steady to weak. Open interest fell 319 positions (209,589). June fell 1,913 positions (30,939) and July added 1,182 positions (59,259). Cash lean index for 5/15 is $67.60, down 1.10. DTN projected slaughter for Tuesday is 395,000 head. Saturday runs are expected at 165,000 head.

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

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