DTN Before The Bell Livestock

GENERAL COMMENTS:

Light to moderate support is seen in lean hog trade Thursday as traders continue to focus on higher cash hog prices and positive export news to China last week. Cattle trade remains mixed with early spill over selling quickly eroding as buyers try to establish longer-term stability at the end of August. Corn remains higher in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 200 points higher with NASDAQ down 11 points.

LIVE CATTLE:

Open: Mixed. A combination of follow-through liquidation and short covering is seen early Thursday morning in nearby live cattle trade. The focus on the market continues to be the aggressive market pullback seen Wednesday and just how much additional pressure this may add to the market before the end of the week. Beef values still seem to be holding well, although traders are starting to wonder when the peak will be seen, leading to additional market pressure. But lower cash cattle trade could continue to limit buyer support during the Thursday session. Cash cattle markets are still quiet following light trade at lower price levels Wednesday. Packer bids are expected to become more available as the day continues, but potentially lower bids may be a disappointment to feeders who continue to hold on to early asking prices and may not buckle at this point, still looking for steady to higher money. Open interest fell 724 positions (297,339). August contracts lost 682 positions (889) and October contracts slipped 1,615 positions (121,796). DTN projected slaughter for Thursday is 119,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents lower. Technical pressure which developed in all cattle trade Wednesday has sparked additional underlying weakness as initial trades look for support at slightly lower price levels. Trade volume remains extremely light, but the overall lack of support in live cattle trade and expectations that the recent moves will further confirm that seasonal highs have already been seen could add increased liquidation through the rest of the month. Trade is likely to remain generally sluggish next week in front of the Labor Day weekend. This lack of volume and trade interest could lead to additional price volatility, with the likely direction of the market moving lower. Cash index for 8/25 is $143.62, down 0.02. Open interest Wednesday fell 540 positions (44,885).

LEAN HOGS:

Open: Steady to 50 cents higher. Renewed buyer support has moved back into lean hog futures trade Thursday morning. The spill over weakness in cattle trade is drawing limited but supportive buyers back to the lean hog complex despite the recent pressure in pork values. China was the #1 buyers for pork from the U.S. last week with 11,200 metric tons reported sold in the morning export sales report. The fact that China stepped back into the market is reassuring that additional further purchases will develop over the coming weeks and months. Total export sales of pork for last week were reported at 39,400 metric tons, creating the expectation that additional strong movements are likely in the next couple of weeks. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest fell 711 positions (217,709). October slipped 1,821 positions (97,297) and December added 235 positions (54,646). Cash lean index for 8/21 is $56.06, up 0.55. DTN projected slaughter for Thursday is 485,000 head. Saturday runs are expected at 277,000 head.

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

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