DTN Before The Bell Livestock

Hog Gains Continue Higher Monday

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

GENERAL COMMENTS:

Hog futures continue to swiftly move higher with October contracts posting triple-digit gains Monday morning. This focus may continue to bring additional underlying support to the market over the next couple of weeks. Cattle trade remains mixed in limited activity. Corn futures are trading higher in mixed trade. Stock markets are mixed in limited morning trade. Dow Jones is 224 points higher with NASDAQ down 42 points.

LIVE CATTLE:

Open: Mixed. Nearby live cattle futures continue to hold limited gains as short covering is developing during the first few minutes of trade in 2020 contract months. Pressure in deferred futures is creating a sense of market apathy across the entire complex as traders remain reluctant to actively step back into the market. Even with the recent pullback in prices at the end of last week, it is important to remember that price levels are holding near the top end of the trading range, as traders continue to steadily work through the previously large cattle supply available on the market. Cash activity remains generally undeveloped with bids and asking prices not expected to be readily available until sometime Tuesday or later. Show list distribution and inventory taking are likely to be the main order of business, but feeders are likely to carry a bullish tone into the week given the recent ability to ratchet prices higher over the last few weeks. Open interest fell 3,925 positions (284,487). August contracts lost 6,038 positions (17,321) and October contracts slipped 336 positions (124,083). DTN projected slaughter for Monday is 117,000 head.

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

FEEDER CATTLE:

Open: Mixed. Front month August futures are holding single-digit gains Monday morning, although the rest of the complex remains under light to moderate pressure based on the lack of active market direction in grain markets and renewed pressure in live cattle futures. At this point, any hope seen from higher cash cattle trade last week has lost its momentum, at least in the feeder cattle complex as traders try to adjust to a potential market gap between $142 and $148 per cwt in nearby futures. Cash index for 8/6 is $141.92, up 1.13. Open interest Friday added four positions (43,134).

LEAN HOGS:

Open: 50 cents to $2 Higher. October lean hog contracts are the beneficiary of spill over buyer support from Friday's triple-digit rally. The hope and expectations that increased buyer support will be seen in the near future has quickly moved prices away from long-term lows, widening the price gap through the complex. October futures are nearing $53 per cwt for the first time in nearly six weeks. The ability to advance prices to and above these price levels through the week will likely bring additional commercial buyers into the market, which has remained extremely stagnant over the last few weeks. Increased hog processing schedules are expected through the week with daily slaughter rates expected to be near or at 480,000 head on a daily basis through most if not all of the week. Open interest added 51 positions (228,035). August fell 1,575 positions (11,378) and October added 610 positions (106,553). Cash lean index for 8/6 is $52.44, down 0.34. DTN projected slaughter for Monday is 478,000 head.

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

P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]
P[R1] D[300x250] M[300x250] OOP[F] ADUNIT[] T[]
P[R2] D[300x250] M[320x50] OOP[F] ADUNIT[] T[]
DIM[1x3] LBL[] SEL[] IDX[] TMPL[standalone] T[]
P[R3] D[300x250] M[0x0] OOP[F] ADUNIT[] T[]

Rick Kment