DTN Before The Bell Livestock

Limited Early Activity Keeps Livestock Futures Stable

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

GENERAL COMMENTS:

Market stability is seen in livestock trade early Tuesday morning. Given the hype and focus on the presidential election this year, traders and most other market watchers are clearly more focused on the election and outside market moves than activity levels in the livestock market. This is keeping cattle and hog futures lightly traded within a narrowly mixed trading range during early Tuesday. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 298 points higher with NASDAQ up 65 points.

LIVE CATTLE:

Open: Mixed. Early trade is extremely sluggish in live cattle trade Tuesday morning. Market stability was seen at opening bell, which is likely to lead to prices moving within a narrow trading range on either side of steady through the morning. Very little market attention is expected to be placed on fundamental or technical beef market factors through the day with election coverage playing a major role in not only livestock markets, but all markets Tuesday. This could limit downward pressure in nearby contracts, but also keep most buyers on the sidelines, as markets will close well before any voting polls close, leaving the market with no indication as to the new president. Traders are likely to adjust positions given their best late-day expectations, but this too will give very little clarity to the overall impact and direction of the market. The rest of the week could become much more volatile depending on election results. Cash cattle interest is expected to remain extremely limited Tuesday with asking prices and bids still hard to pin down. Given the light trade last week in cash markets, packers are expected to become more aggressive as the week continues, but there still remain a sense of caution as uncertainty about further beef demand growth over the coming weeks may limit packers interest in aggressively sourcing cattle in the near future. Open interest regained 1,007 positions (275,603). December contracts lost 1,154 positions (99,567) and February contracts added 1,704 positions (68,625). DTN projected slaughter for Tuesday is 120,000 head.

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FEEDER CATTLE:

Open: Mixed. Feeder cattle futures are stuck in a narrowly mixed trading range from 10 cents lower to 5 cents higher during initial trade activity. The potential that buyer support may continue to slowly fade, pushing prices lower through the morning could allow for nearby contracts to backtrack from recent gains. Without a major outside market shift in the market, trade is expected to remain sluggish within a narrow to moderate trading range as traders seem unwilling to actively move into the market given the uncertainty surrounding the results of today's election activity. Even with all eyes on election coverage, it is still uncertain when results will develop, adding even more questions for all markets. Cash index for 10/30 is $136.48, down 0.28. Open interest Monday fell 855 positions (42,145).

LEAN HOGS:

Open: Steady to 50 cents higher. Lean hog futures trade is posting the most aggressive market moves of all livestock trade early Tuesday morning. But even though hog markets are leading the shift higher in livestock markets, gains are contained to 40 cents per cwt in nearby trade, and appear to be losing momentum each passing minute. With most of the focus Tuesday on the presidential election, the focus of market fundamentals seem to be swept to the back burner, and may not be a major factor through the entire day. It is likely that late-day positioning may develop in both nearby and deferred contracts as traders try to get a better feel of how the election results will impact the hog market. But even this may not give the market much clarity for days to come. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady to $1 lower. Open interest slipped 318 positions (216,841). December fell 836 positions (79,207) and February gained 493 positions (52,081). Cash lean index for 10/30 is $74.49, down 1.00. DTN projected slaughter for Tuesday is 488,000 head. Saturday runs are expected at 278,000 head.

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

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Rick Kment