DTN Before The Bell Livestock

GENERAL COMMENTS:

Traders are slowly but steadily stepping into the cattle complex with live cattle futures leading the upward move. The sharp losses Wednesday as traders closed out the month of September and 3rd quarter of 2020, allowed for renewed price support as traders step back into the complex, looking for longer-term positions. Hog trade is sluggish with limited selling seen in most contracts as traders remain disappointed by less-than-hoped-for export sales results. 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 104 points.

LIVE CATTLE:

Open: Steady to 80 cents higher. Live cattle futures are leading the livestock complex higher with increased focus on firming cash market support and traders more actively moving into the complex during early October. This could add increased focus on trade direction through the end of the week, although outside market moves will continue to be a significant contributing factor in the ability to sustain current buyer support over the next few days. Cash cattle markets started to develop Wednesday with limited light trade seen in most areas at $107 per cwt live basis and $167 per cwt dressed basis. This is $2 per cwt higher than last week, and is likely to set the tone for market firmness through the end of the week. Open interest slipped 911 positions (302,629). October contracts lost 1,268 positions (25,112) and December contracts fell 1,024 positions (126,462). DTN projected slaughter for Thursday is 120,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents higher. Buyer support slowly but steadily stepped into the complex following triple-digit losses Wednesday afternoon. The focus on higher cash cattle trade combined with trades assessing potential further moves in grain and feed prices has quickly curbed the bearish market tone that swept through the entire complex midweek. Even though front month October futures are holding 40 to 50 cent gains in early trade, actively traded contracts are unable to show significant support, holding gains of 5 to 10 cents per cwt Thursday. This will likely limit widespread market swings through much of the morning. Cash index for 9/29 is $142.58, up 0.22. Open interest Wednesday added 585 positions (43,864).

LEAN HOGS:

Open: Mixed. Narrow trading ranges are seen as traders slowly but consistently back away from strong late September gains. The lack of evidence that aggressive pork exports are seen following Germany unable to sell pork to most of its non-European trading partners has not created the windfall of pork buying that some had thought. This will continue to be a long-term shift in the market and will likely have more impact to the 2021 contract rather than nearby price levels. Trades are also focusing on the increased production costs starting to develop with higher feed costs becoming a reality for pork producers. This could limit buyer support in spot December futures in the coming weeks. Export sales last week totaled 39,500 metric tons. The largest buyer was Mexico with 17,900 metric tons. Although sales to China were listed at 6,500 mt and South Korea at 4,000 mt, the market is expected to view this as disappointing given the anticipation built into the complex over the last few weeks. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady. Open interest fell 698 positions (228,759). October slipped 1,514 positions (23,510) and December added 533 positions (95,564). Cash lean index for 9/29 is $76.54, up 0.63. DTN projected slaughter for Thursday is 486,000 head. Saturday runs are expected near 208,000 head in order to make up for earlier production losses this week.

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

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