DTN Before The Bell Livestock

GENERAL COMMENTS:

December lean hog futures surged higher Thursday morning as traders rallied around the news of sharply higher export sales to China lifting traders spirits. Support in hog futures did very little to spark buyer interest in cattle futures which are being pressured once again by higher corn and soybean meal prices. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 120 points higher with NASDAQ up 62 points.

LIVE CATTLE:

Open: Mixed. Firm pressure is seen in nearby live cattle futures as traders quickly back away from the rally seen late Wednesday. The underlying weakness from elevated grain and feed prices continues to add uncertainty to the complex although limited support is trying to gain a foothold in spring and summer 2021 contracts. Moderate to strong export sales to China, Hong Kong and South Korea last week created some good news from a beef demand perspective, but this is unable to totally offset the bearish short-term fundamentals seen in the market based on higher production costs. Cash cattle markets are still generally slow Thursday morning, although a few bids at $107 per cwt live basis are starting to develop in Kansas. Asking prices remain at $110 or higher live and $173 to $175 per cwt. The limited trade seen Wednesday at $108 live and $169 dressed remains a target, but the current pressure in futures prices will quickly limit packer bids from improving in the near future. This could delay active trade until late Thursday or sometime Friday. Open interest slipped 2,226 positions (290,487). October contracts lost 1,013 positions (12,358) and December contracts fell 559 positions (121,218). DTN projected slaughter for Wednesday is 119,000 head.

FEEDER CATTLE:

Open: Steady to $1 lower. Traders quickly backed away from midweek gains as continued support in corn prices continue to add weakness to the complex. November futures are showing market stability with prices 52 cents lower at $137.35 per cwt during early minutes of trade. But the focus holding prices above recent support levels seen earlier in the week could limit further losses in feeder cattle trade. The increased cost to feed cattle over the next several months continues to be a major focus on nearby and deferred contracts, adding potential losses to the complex as grain traders try to assess Friday's WASDE report. Cash index for 10/6 is $142.71, down 0.39. Open interest Wednesday fell 593 positions (43,168).

LEAN HOGS:

Open: Steady to $1.50 Higher. Sharp triple-digit gains quickly developed in spot December lean hog futures with traders focusing on increased export sales last week reported in Thursday Morning's report. Total exports for the week were 60,200 metric tons. China led the list of buyers by a large margin with 29,000 metric tons of new sales reported. Mexico comes in second at 16,200 metric tons, helping to spark renewed expectations of even further demand support over the near future. Deferred futures posted narrow gains although most of the attention through the session will continue to be solidly placed on spot December contracts and the ability to maintain early price support. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to firm. Open interest fell 3,422 positions (225,606). October slipped 2,780 positions (13,554) and December fell 1,721 positions (94,368). Cash lean index for 10/6 is $77.50, up 0.09. DTN projected slaughter for Thursday is 488,000 head. Saturday runs are expected near 282,000 head.

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

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