DTN Before The Bell Livestock

Livestock Futures Under Pressure in Early Trade

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

GENERAL COMMENTS:

Sharp triple-digit losses in lean hog futures continues to focus on weakness developing in lean hog trade as concern about further erosion to pork cutout values is heavily affecting trader interest. Cattle futures are lower, but trying to establish better footing as traders take the opportunity to square positions following last week's gains. Corn is trading lower in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 270 points higher with NASDAQ up 125 points.

LIVE CATTLE:

Open: Steady to 60 cents lower. Firm early morning pressure quickly developed in nearby and deferred live cattle futures as traders enter the month of November. Most of the morning trade has more to do with position adjustments following last week's market shift higher. But the potential to spark renewed buyer interest and develop higher cash cattle trade during early November will be important to keep commercial traders active through the coming days. The uncertainty surrounding the presidential election Tuesday will not be a major factor in outside market moves, but will likely affect price direction and trade activity of cattle futures as trades position holdings. Traders will closely monitor the overall movement in beef values during the week as concerns of demand growth is likely to be the biggest threat to further price support over the coming weeks. Limited cash cattle interest is expected Monday with show list distribution and inventory taking the main priority early in the week. Given the very light trade seen last week, some spillover trade Monday is not out of the question, but it is unlikely that this will be used to establish prices later in the week. Open interest fell 2,210 positions (274,592). December contracts lost 3,359 positions (100,717) and February contracts added 336 positions (66,921). DTN projected slaughter for Monday is 119,000 head.

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FEEDER CATTLE:

Open: Steady to 50 cents lower. Early-week jitters have quickly developed in all cattle trade Monday morning as traders focusing on adjusting positions following the aggressive market shift higher seen in late October. With a new month on the books, and uncertainty surrounding the presidential election on Tuesday, there continues to be market adjustments developing across the feeder cattle and entire cattle market. There may continue to be light to moderate price pressure in nearby contracts through the rest of the morning as traders look for increased direction from live cattle trade as well as movement in cash feeder-cattle sales during early November. Cash index for 10/29 is $136.76, up 2.42. Open interest Friday fell 957 positions (43,000).

LEAN HOGS:

Open: 50 cents to $1.50 lower. Firm pressure in nearby lean hog futures has reestablished a weaker market tone during early week trade. The initial surge lower posted triple-digit losses in nearby contracts, moving prices below $65 per cwt in December and February futures for the first time in nearly a month. The inability to hold prices above this price level at the end of the session is likely to spark follow-through pressure, and add increased market liquidation to the already struggling hog complex. Although the market remains well oversold, the inability for buyers to actively step back into the market at this point could keep prices in a downward trajectory in the near future. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to $1 lower. Open interest liquidated 173 positions (217,190). December fell 663 positions 80,073) and February gained 499 positions (51,588). Cash lean index for 10/29 is $74.49, down 0.09. DTN projected slaughter for Monday is 488,000 head.

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

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Rick Kment