DTN Before The Bell Livestock

GENERAL COMMENTS:

Lean hog futures are leading the market higher Thursday morning as a combination of positive export market news and firming pork prices helped to bring buyers back to the table. Cattle futures remain under light, but evident pressure Thursday as trades continue to remain concerned about cash price pressure and eroding beef values. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 131 points higher with NASDAQ up 62 points.

LIVE CATTLE:

Open: Mixed. Narrowly mixed price shifts are seen in live cattle futures early Thursday morning. The optimism seen midweek in all contracts seems to have quickly eroded with lightly traded December contracts being more impacted by eroding cash markets. The focus on potential market strength through the last half of 2021 based on a combination of beef demand support and tighter cattle supplies should help to keep market bears limited through the upcoming trading sessions. Although cattle weights have not yet been significantly affected, the higher production and feed costs are likely to slowly but steadily reduce overall cattle weights. But this reduction in overall beef hitting the market may not be fully realized until well into 2021. Beef exports for the week ending December 10, posted total sales of 10,100 metric tons, with shipments of 19,300 metric tons. Japan, South Korea and Canada rounded out the top three customers for the week, with Japan sales leading the way with 3,800 metric tons. It is uncertain just how much additional active sales interest will be seen through the end of the year. Cash cattle interest remains quiet early Thursday. The light to moderate trade in the North which developed at $165 to $167 per cwt created underlying weakness in the market with prices falling $3 to $5 per cwt from last week's average. Although trade in the South has not yet developed, a defensive tone is expected through the end of the week. It is uncertain that any support from lower cattle placement numbers in Friday's report will be able to change the course of cash trade, at least this week. Southern business should become more active over the next couple of days with some trade potentially delayed until after the cattle on feed report is released. Asking prices are seen at $109 to $110 live and $169 dressed early Thursday. Active trade may be delayed until late in the week, and potentially following the afternoon release of the cattle on feed report on Friday. Open interest added 2,544 positions (287,991). December contracts lost 589 positions (6,243) and February contracts added 1,383 positions (115,122). DTN projected slaughter for Thursday is 120,000 head.

FEEDER CATTLE:

Open: Steady to 30 cents higher. Narrow gains seen in feeder cattle futures seem to be focused on sustaining the current market support, although it is starting to appear that moves higher over the near future may be much more difficult to attain and keep. Traders are still looking for increased pre-report support based on the expectation of lower cattle placements in November. But the continued fundamental pressure in boxed beef values and cash cattle markets, while corn prices remain elevated is likely to quickly limit further market gains in the near future. Cash index for 12/15 is $136.64, down 0.05. Open interest Wednesday gained 581 positions (42,851).

LEAN HOGS:

Open: Steady to 60 cents higher. Firm gains quickly developed in all lean hog futures trade Thursday morning. The combination of firming pork cutout values midweek and active pork export sales to China and Mexico last week stimulated increased buyer support through the entire complex. This move higher is helping to move February futures above the $66 per cwt price level, while increased momentum is seen in other spring and summer contracts. The ability to maintain morning gains through the rest of the day is likely to attract additional trade interest through the entire complex. Active pork sales were reported in the morning report. Pork export sales last week totaled 39,900 metric tons. Mexico led the buying support with a total of 22,400 metric tons sold. Although China purchases were nearly half of Mexico's large purchase, a total of 11,600 metric tons sold to China still remains impressive. The ability to sustain this type of export pace through the end of the year is likely to further boost support through the entire complex. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents higher. Open interest liquidated 1,185 positions (189,250). February fell 1,411 positions (80,395) and April added 9 positions (40,184). Open interest in pork cutout futures fell 103 positions (566). Cash lean index for 12/15 is $65.05, down 0.01. DTN projected slaughter for Thursday is 473,000 head. Saturday runs are expected at 377,000 head.

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

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