DTN Before The Bell Livestock

GENERAL COMMENTS:

Limited market firmness trickling into live cattle futures is offsetting morning pressure and mixed price movements in lean hog and feeder cattle futures. The underlying concern that demand for beef and pork may quickly soften after Labor Day is adding more caution to the entire livestock complex. Corn prices are mixed in light to moderate activity. Stock markets are lower in limited morning trade. The Dow Jones Industrial Index is 86 points lower with NASDAQ down 40 points.

LIVE CATTLE:

Open: Steady to 50 cents higher. Early gains in live cattle futures have been subdued so far. However, traders look at the higher prices (even if they are lower than desired) as a win. Underlying support in cash cattle trade combined with recent strength in boxed beef values is helping solidify additional nearby market support, but traders are also starting to become concerned that the market could be at or near short-term highs. The question of beef demand following the Labor Day Weekend is causing some market uncertainty as to just how much further this recent rally will be able to go. Cash cattle interest remains very quiet Friday morning. Asking prices are $107 live in the South and $170 dressed in the North. Given the amount of trade seen in the South over the past three days, most business could be done for the week in these areas. But very limited Northern trade has developed at this point, and more cattle are expected to be sold before the end of the day. The general trend of $4 per cwt higher from last week has held true in the South and could spark even larger gains in the North by the end of the day. But packers have shown no additional bids in order to get the process started Friday morning. The lack of aggressive changes in futures trade should be supportive for firming cash markets as the day continues. Open interest fell 903 positions (289,509). August futures lost 1,596 positions (10,014) and October futures liquidated 2,094 positions (124,699). DTN projected slaughter for Friday is 116,000 head.

FEEDER CATTLE:

Open: Mixed. Feeder cattle futures continue to trade mostly lower Friday morning following the market weakness that developed Thursday after higher grain prices Wednesday and Thursday caused some in the feeder cattle market to rethink previous positions. A combination of short-covering and follow-through selling is slowly developing early Friday morning, although price levels have been well contained in a narrow range. The inability to move September contracts above $148 per cwt is only slightly concerning, as long as prices do not retract a large percentage of gains which developed over the last two weeks. Traders are closely monitoring the direction of grain trade as well as movement in live cattle futures through the end of the week before actively stepping back into the feeder cattle complex. Cash index for 8/11 is $142.62, up 0.20. Open interest Thursday gained 258 positions (45,132).

LEAN HOGS:

Open: Mixed. Lean hog futures continue to meander around in a narrowly mixed trading range Friday morning with prices hovering from 22 cents lower to 22 cents higher. The underlying support in the complex continues to be seen in nearby contract months with the focus on elevated pork cutout values over the last couple of days creating firming fundamental support. But given the uncertainty of long-term demand for pork in domestic and export markets, December 2020 through July 2021 contracts have backed away from previous gains. With very little clear direction on how "return to school" procedures will hold up over the next several weeks, the question of what food service pork demand will look like through the fall and winter months remains a mystery. This is likely to keep prices moving in a volatile pattern over the upcoming weeks or months, but still limiting long-term confidence across the lean hog market. Cash hog bids are expected 50 cents lower to $1 per cwt higher, with most bids steady to 25 cents lower. Open interest added 685 positions (219,986). August fell 194 positions (6,845) and October added 228 positions (101,138). Cash lean index for 8/12 is $53.48, down 0.34. DTN projected slaughter for Friday is 478,000 head. Saturday runs are projected near 217,000 head.

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

(c) Copyright 2020 DTN, LLC. All rights reserved.