DTN Before The Bell Livestock

GENERAL COMMENTS:

Market weakness is evident in cattle futures with moderate to firm losses seen in nearby live cattle and feeder cattle trade. The lack of fundamental support this week as cash and meat values have eroded lower is putting significant pressure on nearby futures trade. Hog futures are posting firm gains early Friday based on aggressive support in pork cutouts. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 158 points higher with NASDAQ up 64 points.

LIVE CATTLE:

Open: 50 cents to $1 lower. Firm pressure quickly developed in nearby and deferred live cattle contracts with traders searching for any sense of market support at the end of the week. Weakness in cash and boxed beef values during the week combined with elevated feed prices and eroding feeder cattle prices have traders looking for protection. December futures are trading near $109 per cwt during initial trade, but the ability to hold prices above September lows of $107.82 per cwt will be essential to help sustain potential buyer support in the market over the near future. The delayed weekly export sales report for beef was generally underwhelming, showing no significant gains in overall exports with a total of 13,400 metric tons sold, while 16,200 mt were shipped last week. Japan was the #1 buyer of beef with 3,900 mt purchased from the US, with Mexico following up as a close second with 3,100 mt reported. Cash cattle business may be essentially done for the week following moderate trade over the past two days. There is the possibility of some cleanup trade, but the tone of the market is likely already set. Cattle traded over the last couple of days at $108 live and mostly $169 dressed. This is generally 50 cents to $1 per cwt lower than last week, but consistently steady with early week trade. Open interest liquidated 1,859 positions (271,366). October contracts lost 363 positions (5,941) and December contracts fell 1,506 positions (108,235). DTN projected slaughter for Friday is 117,000 head.

FEEDER CATTLE:

Open: 50 cents to $1 lower. Strong early pressure is quickly developing across the feeder cattle futures as traders focus on continued support in grain markets pushing corn and soybean prices higher, and recent weakness in live cattle trade. November futures are holding just above short term support levels during morning trade, but a move below $135.50 per cwt at the end of the week is likely to spark renewed liquidation across the complex as traders will be actively searching for additional price support early next week. Cash index for 10/14 is $140.91, down 0.01. Open interest Thursday added 81 positions (41,986).

LEAN HOGS:

Open: Steady to 60 cents higher. Early support returned to lean hog futures focusing on moving spot month December contracts above $70 per cwt during initial trade. The focus on renewed commercial and noncommercial support steadily moving back into the lean hog complex is helping to sustain further longer term gains across the complex. Uniform buyer interest is seen in all lean hog futures trade despite the aggressive support expected in the export sales report. Strong pork cutout gains seen late Thursday continues to point to firming overall demand support, which is helping to drive nearby futures during late week trade. Pork exports last week are expected to be viewed as disappointing with total new sales listed at 26,800 metric tons while weekly shipments were 36,000 mt. Mexico became the largest weekly buyer with 11,900 mt sold, while China's numbers remain unimpressive at 5,200 mt for the week. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest added 3,135 positions (233,147). December added 172 positions (92,640) and February added 1,317 positions (45,324). Cash lean index for 10/14 is $78.49, up 0.25. DTN projected slaughter for Friday is 485,000 head. Saturday runs are expected near 261,000 head.

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

(c) Copyright 2020 DTN, LLC. All rights reserved.