DTN Before The Bell Livestock

GENERAL COMMENTS:

Early support in feeder cattle futures is helping to regain market support as buyers are trying to cover early week losses and reevaluate the direction of the market over the next couple of days. This could allow for buyers to step back into the complex with traders still looking for higher cash cattle trade and increased beef values. Hog futures have stumbled in early trade with triple-digit losses creating concerns about breaking through recent resistance levels. Corn prices are lower in light to moderate activity. Stock markets are mixed in limited morning trade. Dow Jones is 99 points lower with NASDAQ up 4 points.

LIVE CATTLE:

Open: Mixed. Trade early Tuesday seems hesitant to move significantly in either direction with prices mixed in a narrow trading range. The rebound in feeder cattle trade and lower corn prices during the morning seem to be helping to calm market fears that became evident Monday afternoon. But there still seems to be very little volume moving into the complex, which could keep prices contained in a narrow but sideways trading range through most of the session. Cash cattle interest remains quiet with bids yet to be seen. Early asking prices are just starting to develop with cattle prices at $107 to $109 live in the South and $175 and higher dressed in the North. The ability to push prices $2 to $3 per cwt higher than last week's averages would be considered a win for cash cattle markets, helping to continue the momentum of higher prices over the last six weeks. It is likely that active trade may not develop until the second half of the week, with some potentially waiting until after Friday's cattle on feed report before trading cattle. Open interest gained 1,817 positions (290,627). August contracts lost 1,179 positions (7,350) and October contracts added 388 positions (124,893). DTN projected slaughter for Tuesday is 118,000 head.

FEEDER CATTLE:

Open: Mixed. Initial follow-through pressure early Tuesday was short-lived with moderate to firm buying support moving back into all contracts during the first few minutes of trade. The pullback in corn prices Tuesday morning has seemed to create some much needed calmness in the feeder cattle complex as traders see the potential that higher feed prices may be limited if overall yield projections do not change significantly in the coming days and weeks. The moves higher are far from offsetting early week losses, but the ability to change the direction of price moves could spark some renewed buyer support through the entire complex. Cash index for 8/14 is $140.20, down $2.05. Open interest Monday gained 218 positions ($45,774).

LEAN HOGS:

Open: Steady to $1.50 Lower. Initial pressure moved into lean hog futures trade Tuesday morning. Although the firm undertone seen in Monday's futures moves seemed to create some underlying confidence in the complex, traders quickly focused on the inability to maintain previous price support in pork cutout values and concerns that further reductions may be seen over the next several of days. Indications that China continues to increase hog production capacity within the country is not a shock to the system, but the focus on China relying less on imported pork as production starts to rebound from Swine Fever issues and demand starts to regrow, could significantly limit the short and long term outlook for pork exports. This would continue to create significant concerns through the market which is not expected to see widespread production cutbacks, even with the recently low price levels. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents lower. Open interest gained 1,291 positions (220,982). October added 299 positions (101,699) and December added 419 positions (51,309). Cash lean index for 8/14 is $53.84, unchanged. DTN projected slaughter for Tuesday is 483,000 head. Saturday runs are expected at 244,000 head.

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

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