DTN Before The Bell Livestock

Mixed Cattle Trade Spark Early-Week Volume

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

GENERAL COMMENTS:

Cattle futures have posted moderate gains during early trade, despite initially shifting lower at opening bell. The ability to spark and sustain renewed buyer interest in live cattle trade could spark renewed longer-term interest through the entire cattle complex through the rest of September. Corn is trading higher in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 481 points lower with NASDAQ down 244 points.

LIVE CATTLE:

Open: Mixed. Initial losses Tuesday morning were quickly checked by moderate buyer support moving back into nearby contracts. This is helping to redevelop buyer interest in late 2020 contract months with October futures now trading above $105 per cwt. If these early week gains can hold, the focus on underlying support through the market could help to slowly but steadily bring buyers back into the market based on growing trade volume and the potential that beef demand may break away from seasonal patterns. Cash cattle activity remains quiet early Tuesday with show list distribution and inventory taking, which usually is done on Monday, taking place during the morning due to the Labor Day holiday. This is likely to delay activity through the first half of the week, although both sides will likely be more focused by midweek as trade interest is expected to improve following the holiday weekend. The concern that additional underlying softness may develop over the next couple of weeks could limit early week aggressiveness by both sides, but the direction of beef values this week will be very important in developing further market trends. Open interest fell 233 positions (293,511). October contracts lost 5,048 positions (98,026) and December contracts added 1,912 positions (78,189). DTN projected slaughter for Tuesday is 119,000 head.

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FEEDER CATTLE:

Open: Mixed. Light trade volume has developed early Tuesday morning although the focus on early buyer support moving back into the complex is starting to carry some momentum as more volume develops across the complex. After front-month feeder cattle futures tumbled $10 per cwt lower over the previous three weeks, there is limited downward pressure still developing in the complex despite recent corn market gains and live cattle pressure. This is leaving the feeder cattle market ripe for a moderate to strong price correction which is likely to gain back a portion of recent losses. Cash index for 9/3 is $140.20, up 0.52. Open interest Friday fell 650 positions (42,513).

LEAN HOGS:

Open: Steady to $1 lower. Firm pressure is settling into lean hog futures trade early Tuesday morning. The unchecked market rally seen last week is starting to pull some moderate selling interest back into the complex. Given the strong rally in pork values last week, it may limit the downside market potential in the next couple of days. But October futures have still had trouble breaking through resistance levels of $60 per cwt, which could limit short-term market support over the near future. Traders will closely monitor not only the direction of pork values and developing pork demand after Labor Day, but outside market moves over the next couple of weeks will have a greater impact in keeping current traders interested in lean hog positions. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest added 147 positions (221,252). October slipped 3,593 positions (84,826) and December added 2,042 positions (65,300). Cash lean index for 9/3 is $58.64, up 0.51. DTN projected slaughter for Tuesday is 482,000 head.

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

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Rick Kment