DTN Before The Bell Livestock

GENERAL COMMENTS:

Firm pressure is seen in all livestock trade early Friday Morning. The fundamental support seen during the week in cattle markets was not enough to spark renewed trader interest Friday. Feeder cattle futures remain most at risk, which during early Friday trade is affecting the entire cattle complex. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 240 points higher with NASDAQ up 99 points.

LIVE CATTLE:

Open: Steady to $1 lower. Live cattle futures have been spooked by firm market pressure in feeder cattle trade Friday morning. It is uncertain at this time just how deep any new or existing selling pressure is, but the lack of support across the complex is evident despite firmness in cash cattle trade and beef values this week. Light to moderate volume is expected through the rest of the morning, although it appears that price shifts may be limited to current market swings without a major adjustment in cash prices or outside market moves. Export sales and shipments of beef remained moderate at best with a total of 14,300 metric tons listed as sold last week and shipments totaling 14,200 metric tons. In an unusual week of beef export sales, China led the list of buyers with 3,500 mt purchased from the U.S. during the week. The focus is not on gains of China purchases, but the lackluster interest seen by normal export partners. Japan totaled 3,100 mt, while South Korea recorded 1,300 mt. Although this may not change the tone of futures trade, the limited movement may curb expectations of further price support. Cash cattle markets are slow to develop Friday morning, but another explosive day of cash cattle trade is expected following sharply higher prices Thursday. Cash business Thursday was seen $110 to $111 live and $172 to $174 dressed, which is generally $3 to $4 live and $7 to $9 dressed higher than last week. More cattle are expected to be sold in all areas, but overall end of week totals won't be available until Monday. Open interest added 41 positions (273,836). December contracts lost 7,614 positions (47,652) and February contracts added 5,526 positions (100,577). DTN projected slaughter for Friday is 119,000 head.

FEEDER CATTLE:

Open: $1 to $1.50 lower. Good news in cash cattle trade and recent market support seems to have very limited interest to traders Friday morning. What started out as early position corrections has turned into moderate market erosion with increased selling pressure developing as the morning continues. Given the aggressive market move higher over the past couple of weeks, even strong triple-digit losses will not be enough to spark technical pressure before the end of the week. But a significant change in market momentum could quickly further buyer support over the next few trading sessions. Cash index for 11/12 is $136.70, up 0.73. Open interest Thursday added 434 positions (35,986).

LEAN HOGS:

Open: Steady to $0.50 lower. Early pressure slowly but steadily moved into nearby lean hog futures Friday morning as traders discounted the export sales report seen before markets opened. Traders focused on adjusting the previous market gains, which seem to have overstepped some traders expectations during the week, although at this point, lean hog futures are expected to hold in a generally steady pattern through the rest of the week. The lack of support in cash and pork cutout values over the last few days is limiting underlying fundamental support across all contracts. Pork exports released Friday morning due to the delayed holiday schedule sparked interest with total sales last week at 42,500 metric tons, while shipments totaled 38,100 metric tons. China purchases surged, recording 21,100 metric ton, nearly half of the entire export total. This support in the china purchases is expected to renew underlying buyer support in nearby lean hog futures, although there remain questions about how consistent and active China will remain in the upcoming weeks. Mexico and Japan rounded out the top three export destinations with 9,900 and 6,600 metric tons respectively. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents higher. Open interest gained 3,807 positions (208,479). December fell 4,437 positions (40,875) and February gained 6,127 positions (74,385). Cash lean index for 11/12 is $71.32, down 0.05. DTN projected slaughter for Friday is 486,000 head. Saturday runs are expected at 277,000 head.

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

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