DTN Before The Bell Livestock

Firm Losses Focus on End-of-Month Postions

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Nick Scalise)

GENERAL COMMENTS:

The last trading day of May has brought about market adjustments to the cattle trade. Although little additional direction is seen concerning market fundamentals of technical changes, wide price ranges may continue Friday as traders head to the weekend. Hog losses have slowed, but the market remains under pressure, given tensions with China. Corn futures are trading lower in light trade. Stock markets are lower in limited morning trade. Dow Jones is 113 points lower with NASDAQ up 32 points.

LIVE CATTLE:

Open: $1 to $2 Lower. Strong pressure is seen early Friday morning with August giving back a portion of the weekly gains as prices dip below $100 per cwt. The underlying support in the market through the week is not likely to be shaken by end-of-week losses, but traders do seem to be slightly cautious about the pace of market support in the last few days, and taking this opportunity to square positions at the end of the month is allowing for further losses Friday morning. Cash cattle markets are quiet early Friday morning with bids still hard to find. Following light trade each of the last three days, it is likely that additional trade will once again develop within the wide trading ranges seen through the week. It is uncertain just how much additional trade will need to be done, although it is likely that at least some clean-up business will take place through the end of the day. Open interest added 3,614 positions (265,575). June contracts lost 2,081 positions (29,295) and August contracts added 4,420 positions (115,128). DTN projected slaughter for Friday is 112,000 head.

FEEDER CATTLE:

Open: 50 cents to $1.50 lower. Strong underlying pressure is developing early Friday morning as traders shifted from the aggressive buying mode seen during the week, and now seem to be primarily focused on end of the week and month position taking. Little has changed in the market over the last couple of days, but with Friday being the last trading day of May, there remains significant potential to square positions and narrow price gaps which have expanded over the last week to 10 days. Limited volume is expected through most of the complex, which could add to the volatility across the complex as triple-digit losses expand in all feeder cattle trade. Cash index for 5/27 is $127.02, down 0.92. Open interest Thursday added 526 positions (29,367).

LEAN HOGS:

Open: Steady to 50 cents lower. Limited pressure is seen in lean hog futures trade early Friday morning following near-limit losses on Thursday. The ability to show moderate export to sales last week with 6,100 metric tons sold to China helped to stem the downward price spiral. There still remains concerns of how the president will handle China and continued tensions surrounding Hong Kong and other issues which have been building over the past few weeks. But for now, traders are showing limited pressure as nearby contracts are hovering in the $55 per cwt trading range with limited expectations of further pressure given current domestic demand. Hog slaughter levels are expected to remain stable to stronger over the near future which helps to put more emphasis on providing adequate pork supplies to the consumer market. Cash hog trade is called $1 lower to $1 higher. Most bids are steady to 50 cents lower. Open interest fell 759 positions (213,898). June fell 2,195 positions (20,804) and July slipped 273 positions (65,220). Cash lean index for 5/27 is $62.95, up 0.42. DTN projected slaughter for Friday is 417,000 head. Saturday runs are expected at 310,000 head.

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

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Rick Kment