DTN Before The Bell Livestock

Continued Gains Push Hog Complex Higher

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

GENERAL COMMENTS:

Firm follow-through gains in hog futures are being offset by mixed cattle market trade. Limited direction is likely to develop in live cattle or feeder cattle futures during the morning as traders look for additional direction from cash market moves and price shifts in wholesale meat markets. Corn is trading lower in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 88 points higher with NASDAQ up 97 points.

LIVE CATTLE:

Open: Mixed. Initial live cattle trade is mixed to mostly lower as traders continue to remain hesitant of previous market gains. The strong pressure in cash cattle trade last week and developing weakness in beef values underpins the futures market support. This is leaving mixed feelings through the entire complex, and will likely limit market direction through the rest of the day. Cash cattle markets still remain inactive with markets likely to remain quiet until the last half of the week. Asking prices are still not fully developed, but reports of cattle priced near $110 per cwt in the South are seen, while northern dressed asking prices remain elusive. Open interest fell 1,075 positions (284,400). December contracts lost 740 positions (7,529) and February contracts lost 1,623 positions (113,816). DTN projected slaughter for Tuesday is 120,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents higher. Light but supporting gains have moved into early trade in all nearby feeder cattle contracts Tuesday morning. The focus on building on gains over the last week is helping to focus on commercial and noncommercial buyer support redeveloping through mid-December. The ability for January futures to hold $140 per cwt price levels through the end of the week is likely to spark renewed underlying late week buyer interest in all feeder cattle trade. Light pressure in corn trade Tuesday is also helping to lend support to the feeder cattle complex, despite the pressure in live cattle futures. Cash index for 12/10 is $136.66, down 0.45. Open interest Monday gained 591 positions (42,049).

LEAN HOGS:

Open: Steady to 80 cents higher. Narrow gains have slowly trickled into the market with traders showing potential to step back into the complex, but hesitant given the aggressive futures gains while fundamental factors are still moving the opposite direction. The ability to spark buyer support in pork cutouts and cash hog prices will go a long way in adding consistency to early week moves in futures trade. But for now, traders are willing to slowly push prices higher, but remain cautious in the event that initial selling pressure may quickly develop later in the day. With a week and a half before the Christmas break, trade activity has not yet slowed, but traders are starting to adjust positions for potential sluggish trade the last two weeks of 2020. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest fell 105 positions (190,262). December fell 251 positions (8,139) and February slipped 764 positions (82,331). Open interest in pork cutout futures gained 44 positions (644). Cash lean index for 12/11 is $64.96, down 0.39. DTN projected slaughter for Tuesday is 494,000 head. Saturday runs are expected to remain aggressive at 378,000 head.

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

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Rick Kment