DTN Before The Bell Livestock

GENERAL COMMENTS:

Active pressure in nearby feeder cattle futures established a weaker tone in all cattle trade Friday. Despite higher cash cattle deals during the week, the pullback in feeder cattle futures is creating pressure in all cattle markets. Hog futures remain firmly higher as traders focus on the extremely strong rally in pork values Thursday. Corn is lower in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 216 points lower with NASDAQ down 147 points.

LIVE CATTLE:

Open: Steady to 80 cents lower. Live cattle futures are being heavily influenced by underlying pressure in feeder cattle. This is causing moderate to strong losses to develop Friday morning. December futures are leading the market lower with an 85-cent loss, as traders remain concerned that follow-through support seen earlier in the week may not be able to be sustained through the end of the year. Concerns of beef demand struggling to show significant increase in the next couple of months is limiting upside market movement. Cash cattle trade is still quiet Friday morning, but the moderate trade seen over the last two days at higher prices is likely to create light clean-up trade Friday. Cash trade is generally $2 to $3 per cwt higher than last week; unless further pressure develops in live cattle futures, this range is likely to hold through the end of the week as packers focus on tighter supplies in the coming weeks. Open interest slipped 4,011 positions (302,629). October contracts lost 1,268 positions (25,112) and December contracts fell 1,024 positions (126,462). DTN projected slaughter for Friday is 120,000 head.

FEEDER CATTLE:

Open: $1 to $2 lower. Sharp end-of-the-week losses are quickly moving into feeder cattle futures. Despite reports of moderate to strong gains in feeder cattle auctions through the week, the concern that markets are unable to hold short-term support levels of $140 per cwt in nearby contracts is leading to additional pressure at the end of the week. At this point, traders are unwilling to step in front of this tumbling market momentum despite any seasonal fundamental support that may have developed over the last couple of weeks. Sustained long-term pressure is not likely to continue, but the active weakness may sustain triple-digit losses through the end of the week. A sustained weekly close below $140 per cwt in October and December futures would likely spark renewed pressure early next week. Cash index for 9/30 is $142.38, down 0.20. Open interest Thursday added 82 positions (43,522).

LEAN HOGS:

Open: 20 cents to $1 higher. Strong gains are developing in lightly traded October futures contracts. Despite the limited open interest and sluggish volume in the front-month contract, buyers continue to push prices higher with very little resistance. This is widening the price spread between October and December contracts, with December futures now holding a $12 per cwt discount. Sharp gains in pork cutout values Thursday added to the underlying support in nearby futures, although it is uncertain just how much additional gains will be able to develop before the end of the week. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to firm. Open interest added 217 positions (228,759). October slipped 1,514 positions (23,510) and December added 533 positions (95,564). Cash lean index for Sept. 30 is $76.74, up 0.20. DTN projected slaughter for Friday is 468,000 head. Saturday runs are expected near 203,000 head.

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

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