DTN Before The Bell Livestock

Hog Futures Erode on Demand Concerns

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

GENERAL COMMENTS:

Trade is limited in most livestock futures Thursday morning. The focus just after opening bell has been on weakness in hog futures, which is adding concerns of further widespread market liquidation. Corn is lower in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 68 points lower with NASDAQ up 25 points.

LIVE CATTLE:

Open: 30 to 50 cents lower. Narrow losses have developed in live cattle futures as traders back away from previous gains with concerns that demand support in beef values seen the last couple of weeks may not be able to hold through the holiday season. The focus on reduced processing speeds next week and limited export sales may add further narrow market losses to the entire cattle complex. Even with current losses, prices remain within the wide sideways trading range, limiting long-term concerns about changing market direction anytime soon. Cash cattle trade is quiet Thursday morning, but packer activity is likely to improve through the day. Previous sales reported for the week remain generally steady with last week, although feeders are still holding onto elevated asking prices, hoping to push cash values 50 cents to $1 per cwt higher by the end of the week. With Friday's Cattle on Feed report, some additional trade may develop late Friday afternoon. Open interest added 201 positions (274,808). December contracts lost 2,243 positions (34,089) and February contracts added 1,383 positions (107,020). DTN projected slaughter for Thursday is 120,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents higher. Early buyer interest moved back into feeder cattle futures following losses in grain trade during the overnight session and early Thursday morning. The focus in feeder cattle continues to be driven by outside market moves and how this will impact short- and long-term production costs. It is uncertain just how deep buyer interest remains and if the renewed pressure in live cattle and lean hog futures will push feeder cattle futures at closing bell. Cash index for 11/17 is $137.38, down 0.17. Open interest Wednesday added 374 positions (36,830).

LEAN HOGS:

Open: 50 cents to $1 lower. Lean hog futures are being pressured Thursday morning. Not only are traders focusing on follow-through pressure in most contracts from Wednesday, but the overall lack of support from the weekly export sales report is adding even more pressure to the entire complex. February futures are leading the complex lower with 90-cent losses in the opening minutes of trade, setting the tone for the market. Pork export sales totaled 28,900 metric tons (mt), while shipments of 38,300 mt were reported. New pork sales to China fell to 2,100 mt, raising concerns that China may be reducing overall pork imports and once again relying on domestic pork production. This could significantly change the ability to move pork supplies out of storage over the coming months. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest added 554 positions (202,959). December fell 1,592 positions (30,297) and February gained 1,674 positions (78,284). Cash lean index for 11/17 is $69.32, down 0.41. DTN projected slaughter for Thursday is 490,000 head. Saturday runs are expected at 285,000 head.

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

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