DTN Before The Bell Livestock

GENERAL COMMENTS:

Firm gains in lean hog futures are met with mixed to moderately lower cattle prices Thursday morning. Uncertainty continues as to how much additional trade will develop before the upcoming holiday weekend. Traders are starting to adjust positions ahead of late-week meat and inventory reports. Corn futures are lower in light trade. Stock markets are mixed in limited morning trade. Dow Jones is 45 points higher with NASDAQ down 14 points.

LIVE CATTLE:

Open: Mixed. Initial morning support was limited as traders continue to focus on the potential for midweek selling to bring additional momentum through the rest of the week. There are concerns that even though monthly slaughter and cold storage reports are expected to remain bullish, they may have limited impact on overall price levels at this point. The inability of futures trade to follow the cash market higher is also creating some longer-term uncertainty through the entire complex. Cash cattle activity remains quiet Thursday morning, but the development of light to moderate cash cattle trade at higher price levels Wednesday seems to have set the tone for the week. It is uncertain if additional needed trade will be seen Thursday, or if there will be a push to hold out any additional sales until after Friday's Cattle on Feed report. Open interest gained 1,974 positions (259,869). June contracts lost 1,744 positions (37,936) and August contracts added 980 positions (105,384). DTN projected slaughter for Thursday is 100,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents higher. Short-covering is the main agenda Thursday morning as traders quickly regain composure following strong triple-digit losses Wednesday. There seems to be few long-term market changes in the cattle market as traders focus on support from cash live and feeder cattle trade developing during the week and the ability to try to stimulate additional meat production as packing plants slowly increase production. There is also likely to be additional positioning ahead of Friday's Cattle on Feed report over the next couple of days with overall trade volume on Friday likely to remain subdued ahead of the long holiday weekend. Cash index for 5/19 is $126.89, up 0.01. Open interest Wednesday added 594 positions (29,763).

LEAN HOGS:

Open: $1 to $2 higher. Strong gains have moved back into the lean hog complex Thursday morning. Although the weekly pork export sales report did not move in the direction many had hoped or expected, traders took hold of the increased open interest in futures trade and expectations that increased slaughter numbers should be seen through the end of the week. Early slaughter plans of 400,000 had been stated in most areas, but late revisions appear that expected amounts may cut overall production through the day and also limit overall Saturday runs. This is not a significant issue when it comes to overall pork production, but the psychological ability to hold slaughter above the 400,000 head threshold remains significant at this point. Cash hog trade is called $1 lower to $1 higher. Most bids are steady 50 cents higher. Open interest surged 4,276 positions (212,814). June fell 180 positions (29,241) and July added 62,107 positions (62,107). Cash lean index for 5/19 is $65.98, down 1.06. DTN projected slaughter for Thursday is 398,000 head. Saturday runs are expected at 164,000 head.

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

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