DTN Before The Bell Livestock

GENERAL COMMENTS:

Cattle futures have posted early buyer interest Wednesday morning as December live cattle futures are setting the tone for the entire complex during initial trade. The focus on renewed futures support is likely to further build the case for cash market support by the end of the week. Corn is trading lower in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 55 points higher with NASDAQ down 48 points.

LIVE CATTLE:

Open: Mixed. Early trade is mixed to mostly higher with traders doing their best to shake off the bearish market shifts seen early in the week. The potential for steady to higher cash cattle trade by the end of the week is helping to rekindle buyer support in nearby contracts with December futures leading the market higher. December futures have now moved above $111 per cwt during morning trade. Although these price levels are still over $2 per cwt below August highs, the recent move is testing short-term resistance levels and sparking renewed active interest through the entire complex. Cash cattle interest remains very limited Wednesday morning. Although the Fed Cattle Exchange Auction will take place through the morning, it is likely that very limited activity may develop until Thursday or Friday this week as both sides look for price direction from futures trade and potential shifts in inventory levels seen in Friday's cattle on feed report. Although placements and overall cattle numbers are expected higher in the late-week report, there is disagreement to how large these gains will be. This could add some cash market uncertainty through the end of the week. With very limited trade in the North Tuesday at $164 per cwt, there is not enough activity to establish a market trend, but feeders remain hopeful that some price support will be seen in the next couple of days. Open interest lost 1,349 positions (294,393). October contracts lost 2,225 positions (31,709) and December contracts slipped 574 positions (119,853). DTN projected slaughter for Wednesday is 119,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents higher. Renewed life is trickling back into feeder cattle trade Wednesday morning with trades looking for increased buyer support in nearby and deferred futures contracts. Moderate pullback in corn trade is helping to put the focus back on overall production costs, and general feeder cattle fundamentals rather than the emotional market shift that has been driving price levels over the last week. Traders are looking for increased cattle placement levels in Friday's report, but given the unusual placement patterns and drought-stricken pasture conditions seen during the year, growing placements should not be a surprise. It is expected that placements will continue to grow through the month of October, which could limit significant price support until late in the year. Cash index for 9/21 is $142.45, up 0.40. Open interest Tuesday added 947 positions (44,142).

LEAN HOGS:

Open: Mixed. Although a strong undertone still remains in lean hog futures trade, limited trade volume Wednesday morning is creating an opportunity to square positions with prices mixed between 30 cents lower and 30 cents higher at opening bell. It is likely that very limited long-term direction will further develop over the next day with traders looking for additional direction from Thursday's export sales report as well as quarterly hogs and pigs report. The combination of these two reports should help to bring some clarity to both supply and demand shifts developing in the hog complex. For now, traders are holding onto the expectations of firming buyer support, but significant supply tightness is not expected until 2021. Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Open interest added 2,496 positions (226,929). October slipped 1,284 positions (30,655) and December added 1,086 positions (95,957). Cash lean index for 9/21 is $72.17, up 0.88. DTN projected slaughter for Wednesday is 486,000 head. Saturday runs are expected near 221,000 head.

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

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