DTN Before The Bell Livestock

Pork Exports to China Spark Buyer Activity

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

GENERAL COMMENTS:

Strong morning gains have flooded the lean hog complex following strong export sales to China in the weekly export sales report. The increased activity is only sparking additional optimism as these exports preceded bans on German pork. The underlying support in lean hog futures remains strong, although the market shifts seen during the week make it very evident that very little is actually known about potential demand growth for U.S. pork to export partners over the near future. Corn is trading mixed in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 237 points lower with NASDAQ down 158 points.

LIVE CATTLE:

Open: Mixed. Live cattle futures have been contained to narrow losses in most live cattle contracts early Thursday morning. Nearby contracts are trading 5 to 15 cents per cwt lower as traders continue to look for additional longer term direction from outside markets and cash market moves over the next couple of days. The weekly export sales report gave little market optimism with overall sales plugging along a pretty normal pattern with nothing major standing out with total export sales, or sales to individual countries. This could limit widespread market swings in the near future as traders seem to be establishing a market range which could hold through most of September. Cash cattle markets are still quiet Thursday morning, although there have been bids developing in Nebraska at $103 live and $163 dressed. This is similar to price levels seen in the South Wednesday and would represent a $2 per cwt gain from last week's levels. Asking prices are still holding at $105 live and $165 and higher dressed, but it is uncertain just how much trade will develop Thursday, or if both sides will hold their positions until sometime Friday. Open interest added 1,922 positions (295,135). October contracts lost 4,756 positions (46,357) and December contracts added 3,434 positions (113,699). DTN projected slaughter for Thursday is 118,000 head.

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FEEDER CATTLE:

Open: Steady to 50 cents lower. Narrow losses have trickled into nearby feeder cattle trade Thursday morning with concerns of limited further buyer support creating some traders to square positions through the end of the week. Although prices are far from testing seasonal support levels, the potential for market stability around the $140 to $144 per cwt price levels is quickly developing. Given the current pressure in cash cattle trade and recent support in grain prices, a sideways market range at current price levels may become well entrenched over the near future. Cash index for 9/15 is $140.60, up 0.08. Open interest Wednesday added 379 positions (42,789).

LEAN HOGS:

Open: 30 cents to $1.20 higher. Strong nearby support flooded October and December contracts early Thursday morning as trades focused on the latest release of weekly export sales numbers. Export sales to China surged higher with 35,600 metric tons reported sold last week. This accounts for 70% of all weekly export sales, which is a significant shift from previous buyer activity. The focus on South Korea, China and Japan banning exports from Germany following ASF found in the country has created even greater expectations that U.S. exports to Asia will continue to expand over the near future. This support has helped to push price levels to $65 per cwt in spot October futures, and could add further price gains in the near future. Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Open interest added 770 positions (221,989). October slipped 2,808 positions (36,363) and December added 674 positions (93,342). Cash lean index for 9/15 is $66.42, up 1.07. DTN projected slaughter for Thursday is 486,000 head. Saturday runs are expected near 188,000 head.

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

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Rick Kment