DTN Before The Bell Livestock

GENERAL COMMENTS:

Early gains in lean hog prices have allowed for increased buying to develop as traders focus on the confirmation of higher pork cutout values. It is uncertain just how much additional buyer support will develop through the day, as buy orders appear to be quickly filled, leaving limited market uncertainty about further gains. Cattle futures are mixed to mostly lower in light trade as feeder cattle futures have backed away from previously strong moves higher. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 28 points higher with NASDAQ up 18 points.

LIVE CATTLE:

Open: Mixed. Live cattle futures seem to have very little momentum over the past two days to show any significant market direction. This is leaving nearby contracts confined in a narrow range from 20 cents lower to 20 cents higher during morning trade Wednesday. The overall focus across the complex continues to be based on outside market direction with the development in grain and hog markets a major focus. The ability to hold onto previous gains continues to add bullish underlying support to the complex, but traders still remain concerned about the inability to regain buyer support in wholesale beef values, which could limit the recent futures price support very quickly. Cash cattle activity remains undeveloped early Wednesday morning with increased focus on expected packer needs through the end of the month. The strong cash buying activity seen in the past several weeks may limit the amount of cattle actually needed during the week, but light to moderate trade is still expected over the next couple of days. Bids are still hard to pin down in all areas, while live cattle asking prices are seen at $105 to $106 per cwt once again. 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 Wednesday is 120,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents lower. Firm pressure is slowly trickling into feeder cattle trade. It is important to realize that the minor price pullback seen Wednesday morning is likely nothing more than a normal market correction as traders adjust to the sharp rally seen over the last week. October feeder cattle futures still remain well established near $143 per cwt, and the ability to remain in the current range would indicate that seasonal market lows may have already been set for the fall. This market bottom is typically not seen until late September or early October, sparking increased focus on potential stability through the fourth quarter of the year. Cash index for 9/14 is $140.52, down 0.95. Open interest Tuesday added 708 positions (41,702).

LEAN HOGS:

Open: Mixed. Early gains in lean hog futures trade sparked optimism following aggressive triple digit gains in pork cutout values Tuesday afternoon. This focus on higher pork prices is expected to underpin the previous market support, helping to put the focus on even higher contract prices in the near future. But after the initial flurry of buying subsided, the focus and concern that continued short term support may not be as easy to maintain as previously through may start to pressure prices over the near future. Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Open interest fell 379 positions (221,742). October slipped 5,351 positions (42,842) and December added 3,692 positions (92,036). Cash lean index for 9/14 is $65.35, up 0.80. DTN projected slaughter for Wednesday is 6000 head. Saturday runs are expected near 189,000 head.

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

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