DTN Before The Bell Livestock

GENERAL COMMENTS:

Mixed trade is seen early Friday as moderate pressure in live cattle and lean hog futures is offset by gains in feeder cattle futures. Pre-report positioning is likely seen in the feeder cattle market as traders look for significantly lower placements in the month of April due to the backlog of cattle unable to be processed. Corn futures are trading lower in light trade. Stock markets are lower in limited morning trade. Dow Jones is 98 points lower with NASDAQ down 17 points.

LIVE CATTLE:

Open: Steady to 50 cents lower. Traders appear to be entering Friday's trade with mixed emotions. The expectation that lower cattle on feed numbers will be seen once the report is released could bring about some underlying support in the market. The growing uncertainty of overall cattle marketed and cattle placed in feedlots could have a major impact on the overall number of cattle in feedlots, as well as the percentage change from year ago levels. Given the report headlines and traders have until Tuesday to ruminate on the results, overall percentage shifts may be the main takeaway from the pre-holiday report. Overall trade volume through the entire complex is likely to remain limited. Even though the upcoming holiday weekend seems to be viewed with little motivation given the lack of things yet to do and limited travel, there is still a typical lull in activity leading up to the weekend. Bids remain quiet Friday morning following light trade that trickled into the market over the last several days. The firming tone of the market is pointing to additional morning trade, if any develops, steady to higher than Thursday's trade of $120 live and $180 to $190 dressed. It is uncertain at this point if either side will wait until after the cattle on feed report as it seems most of the needs have been sourced. With cattle slaughter numbers now pushing above 100,000 on a daily basis, the expectation is that next week additional progress will be seen in order to help push overall price levels higher in the near future. Open interest gained 412 positions (260,046). June contracts lost 1,710 positions (36,202) and August contracts added 998 positions (106,382). DTN projected slaughter for Friday is 103,000 head.

FEEDER CATTLE:

Open: Mixed. Despite the moderate pullback across the rest of the livestock market, feeder cattle futures traded mixed in a narrow range with the focus on the upcoming cattle on feed report likely to keep traders adjusting positions ahead of the long holiday weekend. Lower cattle placements are expected across the board, but the main uncertainty going into the report, is just how much lower placements will be. Trade estimates are extremely wide, giving the indication that there is very little consistency through the industry as to what purchases were actually done during April. Due to many sale barns and auctions limited or shut down over the last couple of months it is very hard to get a handle on just how many cattle were moved. Also, given that markets will be closed once the report is released, traders will not have an opportunity to trade the report until Tuesday morning. The longer incubation time that traders have to process and analyze (and over analyze) the report could create even more volatility in the market once markets open next week. Cash index for 5/20 is $126.60, down 0.29. Open interest Wednesday slipped 76 positions (29,554).

LEAN HOGS:

Open: 30 cents to $1 lower. Moderate to firm pressure is seen through the entire lean hog futures complex as nearby June and July futures led the complex lower. Although the pullback in slaughter levels during April was no surprise, the fact that overall pork production for the year is still 4% above year ago levels even with limited processing capability during late March and April. This will likely limit additional end of the week buyer support from aggressively moving into the market based on concerns that a return to a more normal slaughter rate will compound the issue of pork supplies. Concerns that overall demand for pork from domestic and consumer demand may be much slower to rebuild than increasing slaughter capability. Cash hog trade is called $1 lower to $1 higher. Most bids are steady 50 cents higher. Open interest added 721 positions (213,505). June fell 2,192 positions (27,019) and July added 1,491 positions (63,598). Cash lean index for 5/20 is $64.59, down 1.39. DTN projected slaughter for Friday is 389,000 head. Saturday runs are expected at 167,000 head.

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

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