DTN Before The Bell Livestock

GENERAL COMMENTS:

Mixed trade is seen across livestock trade as traders took a breather following the wide market swings Monday. The focus in hog trade continues to be on potential short-and long-term export demand after exports from Germany have been banned by South Korea and China. But as of now, any additional U.S. export business is speculation with nothing in writing, causing mixed expectations from traders. Cattle futures have slowly backed away from Monday's gains, as traders focus on opportunities to square positions. Corn is trading lower in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 161 points higher with NASDAQ up 169 points.

LIVE CATTLE:

Open: Steady to 60 cents lower. Light to moderate pressure is slowly trickling into live cattle futures as traders slowly but steadily back away from Monday's gains. This move lower is likely to remain insignificant and technically irrelevant unless losses continue to actively grow through the session. Traders appear focused on the narrow market correction in order to adjust positions following a $3.50 per cwt rally over the past two weeks. Currently, prices remain well entrenched in a sideways market trend, which could allow for moderate price shifts to develop in the upcoming days without causing any technical changes to the entire complex. Cash cattle markets remain quiet with limited development expected until midweek or later. A few asking prices are starting to surface at $105 to $107 per cwt, but at this point, bids are unavailable. The firmness in futures trade Monday is helping to build confidence of price stability but it is uncertain how active packers will need to be this week given the recent purchases over the last few weeks. Open interest added 1,090 positions (291,566). October contracts lost 8,270 positions (54,708) and December contracts added 7,312 positions (107,632). DTN projected slaughter for Tuesday is 120,000 head.

FEEDER CATTLE:

Open: Mixed. Following an initial bounce higher Tuesday morning, buyer support seems to have slowed significantly in all cattle trade. The narrow 5 to 20 cent losses seen during morning trade are a far cry from trades pulling away from recent gains, but more focused on position adjustments after aggressive triple digit gains Monday. Traders are closely focusing on the grain market direction as this will significantly affect production costs through the fall and winter months, but the ability for live cattle to hold recent gains and spark steady to higher cash cattle prices in the next two weeks will be essential in maintaining the bullish move in feeder cattle. Cash index for 9/11 is $141.47, up 0.37. Open interest Monday fell 92 positions (41,702).

LEAN HOGS:

Open: Steady to $2 higher. Strong triple-digit gains redeveloping in nearby lean hog futures are focusing on retracting early-week pressure in the market. As nearby prices gyrate higher and lower based on emotional market responses and hopeful expectations, moderate firm gains are slowly but steadily developing in deferred contracts. The direction of trade in spring and summer contracts is likely to be more telling of the overall direction of hog markets and potential demand support surrounding any export changes and Germany's impact in the market. But there still remain a lot of traders focused on immediate reactions, which is why open interest in nearby contracts is surging higher, sparking interest from commercial and noncommercial buyers due the potential long-term shift in global pork supplies. Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Open interest gained 1,795 positions (221,742). October slipped 5,351 positions (42,842) and December added 3,692 positions (92,036). Cash lean index for 9/11 is $64.55, up 1.27. DTN projected slaughter for Tuesday is 485,000 head. Saturday runs are expected near 195,000 head.

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

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