DTN Before The Bell Livestock

Grain Rally Causes Cattle Market Concern

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

GENERAL COMMENTS:

Sharp follow-through losses in feeder cattle trade are focused on continued price support in grain and feed markets. This is creating pressure in all livestock trade with deferred cattle and lean hog futures shifting lower during morning trade. Corn is trading higher in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 66 points higher with NASDAQ down 9 points.

LIVE CATTLE:

Open: Mixed. Trade is quiet in live cattle trade with narrow to moderate gains still holding in nearby futures, while deferred futures are heavily influenced by the pressure in feeder cattle trade. The increased grain market prices is likely to add even more liquidation to the market through the rest of the session with traders unwilling to step into the complex ahead of the weaker market structure. Cash cattle interest remains quiet as both sides remain on the sidelines until the current pressure in futures trade slows. Active trade is likely to be delayed until late in the week. Open interest slipped 335 positions (294,402). October contracts lost 1,012 positions (14,400) and December contracts fell 949 positions (122,632). DTN projected slaughter for Tuesday is 120,000 head.

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

FEEDER CATTLE:

Open: Steady to $1.50 lower. Sharp losses continue to develop in feeder cattle trade as the surge in grain prices is quickly pulling traders away from the complex. The most recent moves have added triple-digit losses in all contract months with November futures now trading near $136 per cwt. If prices break through this price point, there remains firm downward market potential with the next major support near $130 per cwt. This could add increased pressure through the entire complex with prices already breaking through September lows. Cash index for 10/3 is $142.74, down 0.22. Open interest Friday fell 370 positions (43,629).

LEAN HOGS:

Open: Mixed. Limited activity is seen in lean hog futures as nearby contracts continue to slowly work prices higher following aggressive triple-digit gains seen Tuesday. The strong shift higher in grain trade as started to add limited pressure to deferred futures with 10 to 40 cent losses trickling into 2021 contract months. The underlying pressure through the cattle market is still allowing for some traders to shift over to nearby hog futures as many try to limit the volatility in the complex at this time. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to firm. Open interest fell 1,674 positions (230,566). October slipped 1,733 positions (19,422) and December added 632 positions (96,636). Cash lean index for 10/2 is $77.26, up 0.45. DTN projected slaughter for Wednesday is 489,000 head. Saturday runs are expected near 279,000 head.

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

P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]
P[R1] D[300x250] M[300x250] OOP[F] ADUNIT[] T[]
P[R2] D[300x250] M[320x50] OOP[F] ADUNIT[] T[]
DIM[1x3] LBL[] SEL[] IDX[] TMPL[standalone] T[]
P[R3] D[300x250] M[0x0] OOP[F] ADUNIT[] T[]

Rick Kment