DTN Before The Bell Livestock

Early Moves Monday Not What Traders Hoped June Would Bring

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

GENERAL COMMENTS:

Firm pressure is seen in livestock futures trade with as triple digit losses are seen in most nearby contracts. The growing uncertainty of how China will react to criticism from the U.S. concerning issues in Hong Kong, and rising retail meat prices is adding to underlying livestock market weakness. Corn futures are trading lower in light trade. Stock markets are lower in limited morning trade. Dow Jones is 78 points lower with NASDAQ down 24 points.

LIVE CATTLE:

Open: $1 to $2 Lower. Sharp losses have trickled into live cattle futures early Monday morning despite the initial opening price only pushing prices moderately lower. Growing concerns of what the current retail beef prices may do to overall short- and long-term demand is causing some uncertainty through the entire complex. June futures are holding losses near $1.50 per cwt in the early minutes of trade, allowing for prices to quickly back away from the $100 per cwt threshold breeched last week. General widespread outside market pressure Monday morning is also having a weakening effect on the overall cattle complex despite the increased open interest levels seen last week. Cash cattle activity is expected to remain quiet through the first half of the day. Show list distribution and inventory taking is expected to be seen Monday as packers and feeders move into a full week of market activity and processing schedules. The fact that cattle trade has trickled into the market nearly every day over the last several weeks could continue the trend of limited light trade seen early in the week once again. All sides are expected to be focusing on last week's weighted average prices, as given the wide trading range, it is hard to determine where average price levels may land. Open interest added 3,327 positions (268,889). June contracts lost 912 positions (28,377) and August contracts added 3,413 positions (118,536). DTN projected slaughter for Monday is 113,000 head.

FEEDER CATTLE:

Open: $1 to $2 Lower. Follow through pressure has continued to develop in feeder cattle futures as traders are finding little support as trade moves into the month of March. The potential to add additional placements to feedyards as processing plants continue to work through the backlog of cattle is leaving room for additional buying support of feeder cattle. But concerns that live cattle trade may be hard pressed to hold recent gains is causing widespread pressure through the entire complex. This could add even more uncertainty through the entire complex as traders look for any sign of market stability during early June. Cash index for 5/28 is $129.36, up 2.34. Open interest Friday added 506 positions (29,872).

LEAN HOGS:

Open: $2 to $3 Lower. Sharp initial losses in lean hog futures add concerns that overall pressure may continue to develop through the lean hog complex. Although the hope that a sense of market stability would develop as the pork industry is starting to regain production levels and show consistency of product movement and retail availability, concerns of further tensions with China could add significant weakness to the complex. Reports that China has ordered state run firms to reduce or halt purchases of products such as pork has quickly caught the eye of market participants. It is still uncertain just how much validity is seen in these claims, but with trades returning from the weekend break and tensions still high between the two countries, market bearishness is seen until proven wrong. Cash hog trade is called $1 lower to $1 higher. Most bids are steady to weak. Open interest added 3,528 positions (217,534). June fell 603 positions (20,311) and July added 806 positions (66,024). Cash lean index for 5/28 is $61.25, down 1.70. DTN projected slaughter for Monday is 418,000 head.

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

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Rick Kment