DTN Before The Bell Livestock

GENERAL COMMENTS:

Pressure is slowly but firmly developing in lean hog trade with traders covering positions following aggressive triple-digit gains over the past two sessions. This market shift is creating some stability into the complex with prices likely to remain range bound through most of the morning. Cattle are mixed to slightly higher with traders looking for further support in cash and boxed beef values. Corn prices are firmly higher in light to moderate activity. Stock markets are mixed in limited morning trade. Dow Jones is 324 points higher with NASDAQ down 34 points.

LIVE CATTLE:

Open: Mixed. Follow-through gains in nearby live cattle futures have been hampered by light, but very evident weakness in deferred trade Tuesday morning. Live cattle futures have gained momentum over the last several days from expectations from strong feeder cattle gains and firming market fundamentals, but uncertainty in long-term beef demand growth will continue to add uncertainty to the complex. Decisions made over the next couple weeks on how to proceed with school and college classes and activities will have widespread impacts in the general economy. This is likely to also heavily impact beef demand not only in the upcoming days and weeks, but potentially through the rest of the year. These widespread decisions on local and regional levels are creating uncertainty in futures trade Tuesday morning. Cash cattle markets remain undeveloped with packer bids hard to pin down at this point. Asking prices remain elevated with live cattle in the South priced at $105 and higher, while dressed northern cattle are listed at $168 per cwt. It may be either later in the day or sometime Wednesday when more activity is seen by packers, but given the history over the last month of trade starting to develop on Tuesday, it is very possible that more interest will be seen in the coming hours. Given the recent support in cash and futures trade, feeders are looking for significant gains during the week, and may limit any reductions in asking prices in the near future. Open interest added 1,551 positions (285,659). August contracts lost 1,827 positions (15,252) and October contracts gained 598 positions (124,544). DTN projected slaughter for Tuesday is 119,000 head.

FEEDER CATTLE:

Open: Steady to 40 cents higher. Follow through buying quickly moved into the feeder cattle futures complex Tuesday, although the ability to push prices significantly higher was hampered by limited trade volume. Although there still remains a firm undertone in the complex, the concern that feeder cattle futures typically hit seasonal highs in late July could start to spook some traders despite underlying firm market support. Most contracts remain 10 to 20 cents higher during early trade with further direction focused on movements in nearby and deferred live cattle contracts. Even if active support is seen in nearby live cattle markets, spring and summer 2021 price moves are more relevant to the feeder cattle trade, as overall demand uncertainty remains. Cash index for 8/7 is $142.61, up 0.69. Open interest Monday added 456 positions (43,587).

LEAN HOGS:

Open: Mixed. The hog market continues to be most impacted by the Derecho Storm which blew through the Midwest Monday. Daily slaughter is being reduced by as much as 25,000 head from estimated Monday runs due to the the destruction and disruption of infrastructure and power in many areas. This is not expected to have a long-term impact on the market, but it will add short- and long-term challenges to some production facilities, mainly in Iowa and Illinois. Futures trade is mixed to mostly lower as traders seemed to take a break from the aggressive market rally seen over the last two sessions. This pullback in prices is not expected to change the tone of the market, but give traders time and opportunity to square positions given the technical support still holding in the complex. Cash hog bids are expected 50 cents lower to $1 per cwt higher, with most bids steady to firm. Open interest fell 1,467 positions (226,575). August fell 2,066 positions (9,398) and October added 377 positions (106,899). Cash lean index for 8/7 is $53.02, up 0.66. DTN projected slaughter for Tuesday is 458,000 head. Saturday runs are loosely projected at 225,000 head at this time.

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

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