DTN Before The Bell Livestock

LIVE CATTLE:

Open: 50 cents lower. August cattle are down 37 cents early Wednesday, looking to test Monday's reversal with cash prices anticipating more bearish pressure this week. August prices have been held in check by resistance from the 100-day average since early May and that pattern continues with the average currently near $98. USDA estimated Tuesday's cattle slaughter at 119,000, down just 3,000 from a year ago and mostly back in business. A return to more normal slaughter levels is a big relief for the industry, but it will take time for cattle inventory to work through the higher weights and backed up supplies. Dow Jones' pre-report survey expects USDA to show 2.5% fewer placements than a year ago in Friday's on-feed report. The current bearish pressure on live cattle prices is also evident as last week's negotiated trades were roughly $20 lower than formula values. Dressed trade has been light so far this week with some trades reported in Nebraska at $158, down roughly $8 from last week's weighted average. Live offers at $108 are still waiting for takers. Tuesday's boxed beef trade placed choice prices at $227.89, back to within roughly $20 of where they were before coronavirus shook up the market. Selects finished at $213.17, down $6 since Friday. Total open interest was up 1,269 at 272,059 on Tuesday's higher trade. June contracts were down 772 to 7,458 and August was up 901 at 130,302.

FEEDER CATTLE:

Open: 57 cents lower. August feeder cattle are down 35 cents early Wednesday, trading in the same sideways range for the past two months with well-defined resistance near $135 and the 100-day average. It is impressive how both, live cattle and feeder cattle prices have held firm the past two months, but there continue to be concerns about working through extra supplies that had difficulty getting to market while meat plants were down, stuggling with coronavirus outbreaks. Technically, the April 6 low near $110 in August feeders should offer firm support, but prices may continue to drift for a while. The Feeder Cash index for June 15 is listed at $128.78, down $0.74 from a week ago. Total open interest was up 379 at 32,998 on Tuesday's higher trade. August contracts were down 8 at 17,196.

LEAN HOGS:

Open: 85 cents lower. August hogs are down 85 cents early Wednesday, challenging the April low of $51.90. December hogs are also starting lower, but remain over $4 above their April low as traders anticipate a smaller hog inventory down the road, affected by the destruction of inventory that had no market opportunities as meat plants went offline. USDA estimated Tuesday's hog slaughter at 458,000, down 4% from a year ago and struggling to get back to higher, pre-coronavirus levels. Pork cutouts dropped to $64.27 on 554.74 loads Tuesday, down $5.72 since Friday afternoon. Tuesday's packer margin was estimated at $68.71 per head, enough to keep packers interested in buying hogs while plants keep working at expanding slaughter. The Lean Hog Index for June 15 was posted at $48.10 up $3.67 from a week ago and roughly $4 below the July futures contract before Tuesday's lower trade. Total open interest was down 4,498 at 220,188 on Tuesday's lower trade -- a possible sign of commercial net longs abandoning long-held positions. Open interest in the July contract was down 3,099 at 30,667 while August contracts were up 2,828 at 82,858.

Todd Hultman can be reached at Todd.Hultman@dtn.com

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