DTN Before The Bell Livestock

Mixed Prices Adds Market Caution

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

GENERAL COMMENTS:

Trade Tuesday morning is more focused on price adjustments and traders taking positions following recent market shifts than any significant change in direction. The light to moderate pressure in live cattle trade is not expected to break away from recent highs, but could create some underlying caution about further buyer support. Hog futures are mixed with generally weakness still seen across most of the complex, while nearby futures are showing limited support after sharp Monday losses. Corn futures are trading lower in mixed trade. Stock markets are mixed in limited morning trade. Dow Jones is 18 points lower with NASDAQ up 8 points.

LIVE CATTLE:

Open: Steady to 50 cents lower. Moderate trade pressure is quickly developing Tuesday morning. Although given the recent market support and move to multi-month highs Monday, the current shift lower is still considered a narrow market adjustment. But the inability to spark renewed interest through nearby live cattle trade through the end of the week could quickly squash any longer-term market support developing in the complex. Traders remain concerned about the ability to steadily move boxed beef values higher through early August given the uncertainty in beef demand growth over the coming weeks. Cash cattle markets remain quiet with limited asking prices or bids expected through most of the day. Some limited trade could develop to fit the pattern seen over the last few weeks, but the majority of trade will likely be pushed off until the last half of the week. Open interest added 1,380 positions (284,503). August contracts lost 1,089 positions (31,282) and October contracts added 634 positions (124,508). DTN projected slaughter for Tuesday is 119,000 head.

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FEEDER CATTLE:

Open: Mixed. Initial support quickly developed in nearby feeder cattle trade Tuesday morning in reaction to the strong pressure developing in corn markets. The lower corn prices, and overall good to excellent crop ratings seen across many areas of the country in Monday's crop progress report is focusing on potentially lower feed prices. This could add even further support for feeder cattle trade in the near future. But without follow-through support in live cattle futures, feeder cattle buyer interest may quickly erode. Cash index for 7/31 is $138.58, down 0.67. Open interest Monday lost 1,686 positions (43,975).

LEAN HOGS:

Open: Mixed. A weak undertone still exists through the lean hog futures complex with December through July 2021 contracts still showing significant pressure Tuesday morning. But nearby August and October futures are posting narrow gains as traders try to adjust positions following the triple digit losses Monday. August futures have been trading on either side of $50 per cwt through the morning, but underlying support is expected to be limited given the overall softness in cash values and choppy moves in pork cutout values. Cash hog bids are expected 50 cents lower to $1 per cwt higher with most bids steady. Open interest fell 1,357 positions (232,815). August fell 1,968 positions (24,483) and October added 2,734 positions (105,379). Cash lean index for 7/31 is $53.52, unchanged. DTN projected slaughter for Tuesday is 475,000 head. Saturday runs are expected at 229,000 head.

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

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Rick Kment