DTN Before The Bell Livestock

GENERAL COMMENTS:

Live cattle futures have posted narrow but mixed trading ranges early Monday morning. The hope that this glimpse of higher moving prices in nearby contracts will gain momentum through the day is adding limited optimism to the entire complex. Hog futures are mostly lower, but narrow initial gains in December contracts is helping to focus on sustaining recent market support. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 65 points higher with NASDAQ up 88 points.

LIVE CATTLE:

Open: Mixed. Initial gains in nearby live cattle futures has helped to bring much needed stability to the complex Monday morning. But concerns that early buying may not be able to hold could cause further market erosion. If initial price support is indeed, just early session short covering in a downward moving market, the potential to move December live cattle futures below support of $179.82 per cwt is very possible. The movement below these levels would take out the entire market rally seen over the last month, creating longer-term bearish factors through the complex. Cash cattle activity may be moving extremely slow Monday as packers and feeders restart the process following lower price levels last week. Overall live trade sold at $107 to $108 per cwt, mostly $108, while dressed business was mostly $169 per cwt. This is generally 50 cents to $1 per cwt lower than last week, but shifted the market trend of the market following firmness over the last few weeks. Show list distribution and inventory taking is likely to be the main focus most of the day with cattle not likely priced until near midweek. The upcoming cattle on feed report Friday will also likely play a significant role in delaying cash activity this week. Open interest liquidated 2,090 positions (269,276). October contracts lost 887 positions (5,054) and December contracts fell 1,506 positions (108,235). DTN projected slaughter for Monday is 119,000 head.

FEEDER CATTLE:

Open: 50 cents to $1 lower. Follow-through pressure in feeder cattle trade has continued to add concern of long term pressure through the entire complex. November futures are holding 65 cent losses during early trade, holding just above $134 per cwt, with concerns of additional long term pressure developing after breaking through previous support at $135.50 per cwt late last week. The active open interest gains last week in the feeder cattle complex is pointing to an oversold market structure, but traders remain hesitant to actively step back into the market as buyers given the volatility in the entire cattle complex. Cash index for 10/15 is $140.22, down 0.69. Open interest Friday added 1,571 positions (43,555).

LEAN HOGS:

Open: Steady to 90 cents lower. Follow-through selling pressure remained evident in most contracts Monday morning, although spot December futures posted narrow single-digit gains at opening bell. The inability to spark additional buyer interest has quickly turned prices lower with uniform pressure in all 2021 contract months. At this point, most of the selling associated with the lean hog complex is expected to be driven by position taking. But the inability to curb the downward shift during the day Monday could quickly change the previously bullish market trend, leading to market uncertainty over the coming days and weeks. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to 50 cents higher. Open interest liquidated 3,005 positions (230,142). December fell 1,611 positions (91,029) and February added 235 positions (45,559). Cash lean index for 10/15 is $78.24, down 0.25. DTN projected slaughter for Monday is 482,000 head.

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

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