DTN Before The Bell Livestock

Initial Hog Market Pressure Offset By Active Support

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

GENERAL COMMENTS:

The afternoon release of the Cattle on feed report is the main focus through the cattle complex. Although higher cash cattle and boxed beef values have developed through the week, concern that increased inventory may erode previous support has traders cautious. Initial moves lower in hog trade focused on the increased inventory seen in Thursday's hogs and pigs report. But early selling quickly died, leaving room for active price support to redevelop. Corn is trading higher in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 86 points lower with NASDAQ up 8 points.

LIVE CATTLE:

Open: Mixed. Narrow trading ranges are holding in live cattle futures early Friday morning. The focus on increased cash cattle trade and recent gains in boxed beef values is helping to support October futures, while the rest of the complex is remaining cautious ahead of the monthly cattle on feed report. Increased cattle numbers from year-ago levels are expected in the afternoon report, which may add some underlying pressure through the entire day Friday and if numbers come in as expected or higher, further losses are likely early next week. Cash cattle trade started to develop Thursday with live cattle trading at $105 per cwt while dressed trade is reported at $165 per cwt. These prices are generally $2 per cwt above week-ago levels and indicate additional firm support developing through the complex over the last two weeks. More trade is likely, but could be delayed until after the cattle on feed report at 2 p.m. Open interest gained 1,619 positions (294,883). October contracts lost 529 positions (30,168) and December contracts added 1,579 positions (121,205). DTN projected slaughter for Friday is 118,000 head.

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FEEDER CATTLE:

Open: Steady to 50 cents lower. Early pressure is seen in feeder cattle trade as traders not only slowly back away from gains seen Thursday, but the expectation that feeder cattle placements during August may be higher than early projections and bring additional weakness to the cattle complex early next week. Cash index for 9/22 is $142.28, down 0.17. Open interest Thursday added 321 positions (44,001).

LEAN HOGS:

Open: Steady to 50 cents lower. Initial pressure slowly but steadily moved into lean hog futures as traders tried to adjust positions following increased inventory levels revealed in Thursday's hogs and pigs report. With all hog numbers 1% above year-ago levels, and the same increase in market hogs, the focus of reducing overall supplies over the near future has been dashed. But traders have quickly moved away from the market bearishness as much of the increased production has already been factored into the market before the report. But strong gains in pork cutout values and expected strong export demand during early October has sparked renewed buyer support in all hog futures contracts Friday morning. Cash hog bids are expected $1 lower to $2 per cwt higher, with most bids steady to $1 higher. Open interest fell 123 positions (226,263). October slipped 1,104 positions (28,386) and December fell 255 positions (94,499). Cash lean index for 9/22 is $72.89, up 0.72. DTN projected slaughter for Friday is 478,000 head. Saturday runs are expected near 226,000 head.

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

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Rick Kment