DTN Before The Bell Livestock

Price Firmness Sets Tone for Positive Week

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

GENERAL COMMENTS:

Early gains in live cattle and feeder cattle trade Monday morning has sparked follow through buyer activity in all cattle contracts. The focus on sustaining live cattle prices above $100 per cwt in all contracts has given the entire market an emotional boost during early trade as traders focus on potential demand support through the rest of the summer. Corn futures are trading lower in mixed trade. Stock markets are higher in limited morning trade. Dow Jones is 214 points higher with NASDAQ up 138 points.

LIVE CATTLE:

Open: Steady to 50 cents higher. Firm follow through gains have steadily moved into the complex Monday morning. The focus on sustaining nearby price levels above $100 per cwt with August trade barely holding above this level is causing uniform buying interest. But traders still remain concerned about the ability to push prices significantly higher as demand uncertainty and the availability of cattle in the system has upward market potential limited over the coming weeks. With hot weather expected to continue through most of July, there will be more emphasis on how this will affect heavy cattle and current rate of gains and death loss due to heat stress on these cattle. This will not likely affect overall cattle numbers on a macro level, but will have significant impact on individual feeders and add to the already significant financial pressure of feedlots. Cash cattle trade remains quiet with show list distribution and inventory taking likely to limit bids and asking prices through the morning. It is possible that some limited trade may trickle into the market by the end of the day, but most activity may not steadily develop until midweek or later. Open interest slipped 2,535 positions (257,065). August contracts lost 8,494 positions (78,762) and October contracts added 3,930 positions (87,543). DTN projected slaughter for Monday is 120,000 head.

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FEEDER CATTLE:

Open: $1 to $2 higher. Strong triple-digit gains seen in feeder cattle trade early Monday morning focuses on several factors, but is steadily bringing buyer support back to the complex. Firm follow-through gains in live cattle trade is helping to solidify the gains seen last week. Weather conditions in much of the country, especially hot and dry conditions in several cattle-producing areas that may heavily affect pasture conditions, are creating questions about current gains and availability of young cattle not only through the next few months but into 2021. At this point there still remains very limited premiums for deferred contracts as feeders remain hesitant to aggressively contract long-term placements. But the ability for August futures to move and hold prices above $135 per cwt gives even more hope for further long-term support. Cash index for 7/8 is $133.69, up 3.54. Open interest Friday added 537 positions (38,263).

LEAN HOGS:

Open: Mixed. Despite strong spillover support moving into the livestock market, hog trade remains extremely subdued with narrowly mixed price moves limiting any sense of market direction Monday morning. Lean hog futures are trading from 20 cents lower to 10 cents higher with August through February contracts shifting lower due to concerns about short- and long-term demand support for pork. Although hog weights have been steadily decreasing over the last month, the focus on still burdensome hog numbers in the production system is keeping prices under pressure. Hog slaughter levels are lower than previously expected due in part to one major plant dark Monday due to a floating holiday. But when all plants that are expected to run this week return to production, overall daily slaughter rates are expected to be around 475,000 head. This combined with a strong run on Saturday will return levels near year-ago levels and should help to slowly clear the backlog of supply over the coming weeks and months. Cash hog trade is called 50 cents lower to 50 cents higher. Most bids are steady to firm. Open interest fell 2,203 positions (223,491). July fell 846 positions (11,219) and August slipped 5,978 positions (63,527). Cash lean index for 7/8 is $45.18, down 0.17. DTN projected slaughter for Monday is 457,000 head.

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

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Rick Kment