DTN Before The Bell Livestock

Quiet Trade Keeps Prices Stable

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

GENERAL COMMENTS:

Following active support and triple-digit gains across livestock futures Tuesday, a combination of follow-through buying support and position-taking is developing early Wednesday morning. This lack of market direction is keeping prices within a narrow to moderate trading range, and most traders remain on the sidelines looking for additional outside market direction to develop over the next few hours. Corn is higher in light to moderate trade. Stocks are mixed in limited morning trade. Dow Jones is 86 points higher with NASDAQ down 41 points.

LIVE CATTLE:

Open: Mixed. Price pressure is slowly but steadily moving into nearby live cattle contracts. Even though prices are lower, the lack of intensity is due more to lack of volume than any directional shift in the market. It is uncertain just how deep initial sell orders will go, but all indications point to limited numbers of traders adjusting positions, while light to moderate buyer support is falling in behind this market pressure. Traders have very little incentive to make widespread adjustments, which is likely to keep prices within a narrowly mixed trading range through most of the session. Cash cattle bids are slowly developing in parts of Texas at $110 per cwt. This is steady with last week and based on very limited trade in the South on Tuesday afternoon. Although asking prices remain at $112 per cwt, without major shifts in futures trade cash markets may remain generally steady with last week's prices. Activity in the North remains quiet with bids and asking prices still hard to pin down. It is likely to be sometime Thursday or Friday before we see active trade in these areas. But packer interest is expected to slowly improve through the day in all areas. Open interest fell 1,143 positions (274,642). December contracts lost 3,804 positions (36,339) and February contracts added 667 positions (105,660). DTN projected slaughter for Wednesday is 121,000 head.

FEEDER CATTLE:

Open: Steady to 10 cents lower. Price softness is seen in feeder cattle futures Wednesday morning, although compared to the triple-digit gains of Tuesday, the narrow, single-digit losses are more due to lack of volume than any change in trade direction. It is likely limited buyer support will attempt to curb the downward movement of the morning as traders become more active. The direction and activity in live cattle futures as well as grain market moves should be the main driver in the feeder cattle complex as actively traded feeder cattle contracts are hovering within the $139 to $140 per cwt trading range. This range may hold not only through the weekend but into early next week when overall trade volume is expected to remain subdued. Cash index for 11/16 is $137.55, down 0.13. Open interest Tuesday added 793 positions (36,445).

LEAN HOGS:

Open: Mixed. Initial price movements across lean hog futures and most livestock trade have been mixed early Wednesday morning with follow-through buyer support trickling into the market, while limited position taking is developing due to the light trade volume. Very little market interest is seen early Wednesday and with no significant market news expected through most of the morning, trade may remain sluggish for the majority of the midweek trading session. Current price levels have distanced themselves from recent support levels and are a long way from testing resistance. This gives traders ample room to shift prices higher and lower over the coming days without testing any technical price points. The up and down shifts in pork cutout values continue to be a challenge to manage, creating growing uncertainty and lack of market direction ahead of the Thanksgiving holiday. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest fell 2,572 positions (202,476). December fell 3,115 positions (31,890) and February gained 647 positions (76,678). Cash lean index for 11/16 is $69.73, down 0.35. DTN projected slaughter for Wednesday is 491,000 head. Saturday runs are expected at 280,000 head.

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

Editor's Note: See DTN Livestock Analyst ShayLe Stewart's complete 2021 market outlook live by attending the DTN Ag Summit, Dec. 7-9. This year's event is virtual, and as a DTN subscriber you can attend for FREE. Our premier farmer and rancher event features markets updates from ShayLe, DTN Lead Analyst Todd Hultman and a weather outlook by Senior Ag Meteorologist Bryce Anderson. Other speakers include: U.S. Ambassador Kip Tom; Ken Eriksen and Paul Hughes of IHS Markit; Microsoft Chief Scientist Ranveer Chandra; personal development speakers David Horsager and Jon Gordon; farmers Reid and Heather Thompson; farm blogger Meredith Bernard, and many more.

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Rick Kment