DTN Before The Bell Livestock

GENERAL COMMENTS:

Initial gains have moved into cattle trade as traders adjust positions after Thursday's market pressure. Given the current market moves and focus on afternoon reports, directional changes in live cattle and feeder cattle are not likely. But traders are taking full advantage of the sideways market range, allowing prices to fluctuate in a moderate to wide level ahead of Friday's reports. Corn futures are trading higher in mixed trade. Stock markets are lower in limited morning trade. Dow Jones is 120 points lower with NASDAQ down 195 points.

LIVE CATTLE:

Open: Mixed. Early gains in nearby contracts continue to hold most of the morning although the lack of interest is seen in deferred contracts with prices mixed in a narrow range. Trade volume is likely to remain extremely sluggish through most of the session, although traders are focusing on the potential to cover short positions seen Thursday. The focus on the upcoming cattle on feed report and cattle inventory report Friday afternoon will likely keep prices mixed, but within a moderate range during most of the session. Cash cattle activity remains quiet Friday morning. Moderate business has trickled in through the week with prices seen at $96 live in the South and $157 to $158 dressed in the North. Asking prices for cattle left on showlists remain around $98 per cwt live and $160 per cwt dressed basis. Although the core of weekly sales are expected to already be on the books, there could be some additional trade developing through the day. It is uncertain if that potential trade will appear before or after the afternoon report release, but either way, it is very unlikely that the tone of the market will significantly change from levels seen earlier in the week. Open interest added 59 positions (278,867). August contracts lost 1,867 positions (44,057) and October contracts slipped 358 positions (117,915). DTN projected slaughter for Thursday is 119,000 head.

FEEDER CATTLE:

Open: Mixed. Feeder cattle futures have continued to shift back and forth during morning trade with nearby gains seen in August and September contracts Friday morning. While light to moderate pressure is seen in deferred contracts. Although no major surprises are expected in the cattle on feed or cattle inventory report which will be released Friday afternoon, traders are adjusting positions just in case. This is likely to leave prices mixed in a moderate range through most of the session, although volume is expected to remain generally light given lack of additional market direction. Cash index for 7/22 is $137.96, up 1.54. Open interest Thursday gained 410 positions (41,972).

LEAN HOGS:

Open: Steady to $1 lower. End-of-week pressure is slowly but steadily developing in lean hog trade Friday morning. Despite the recent run-up in price levels over the last week, especially in August futures, the traders are taking protection ahead of the weekend break. With continued tensions between the U.S. and China, traders remain more concerned with the inability for markets to trade Saturday and Sunday, and are willing to give back a portion of weekly gains to mitigate possible risk of a major political development over the next couple of days. The back and forth moves in pork cutout values through the week is giving glimpses of hope that prices may surge higher, but lack of consistency has traders concerned at this point. Cash hog bids are expected 50 cents lower to $1 per cwt higher with most bids steady to 50 cents higher. Open interest added 2,694 positions (224,997). August fell 1,313 positions (37,698) and October added 1,584 positions (95,042). Cash lean index for 7/22 is $49.69, up 0.27. DTN projected slaughter for Friday is 473,000 head. Saturday runs are expected at 226,000 head.

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

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