DTN Before The Bell-Livestock

Cattle Futures Start Lower Early Tuesday

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

Livestock futures are trading mixed to mostly lower early Tuesday as traders are pulling back from moderate gains in cattle gains seen late Monday. The support which developed Monday helped to push prices to near-limit gains is creating some market corrections, but as more volume steps into the complex, markets may stabilize through the morning. Corn futures are trading lower in light early trade. Stock markets are mixed in light trade. Dow Jones is 42 points lower, while Nasdaq is down 21 points.

LIVE CATTLE:

Opening call: 50 cents to $1 lower. Moderate losses have quickly developed across the live cattle futures complex Tuesday morning in reaction to the aggressive triple-digit gains seen in nearby contracts Monday afternoon. The intensity that prices surged to near limit gains late in the day without any strong underlying fundamental support and light volume in the market is creating some negative reaction through the market, allowing prices to back away from these price levels. But markets may moderate through the morning as traders step back into the complex although trade volume is expected to remain sluggish through the rest of the week. This could keep prices swinging in a wide price range over the next few days in a wild fashion. Cash cattle activity remains quiet with show lists distributed Monday being the focus of market activity as bids and asking prices were undeveloped. Market activity is not likely to be extremely active until sometime Wednesday, when both sides are likely desiring to get business done before breaking before the Thanksgiving holiday. Open interest Monday added 598 positions (277,660). Spot December fell 3,648 positions (51,504) and February contracts added 2,939 positions (112,472). DTN projected slaughter for Tuesday is 111,000 head.

FEEDER CATTLE:

Opening call: Mixed. Sluggish trade is developing early Tuesday morning as traders appear to be content treading water following the strong triple digit gains which quickly developed in the last half of the session Monday. The strong support seen across the entire cattle market seems to be driven by light volume and pre-holiday position taking and not fundamentally driven, which could create additional long term concerns through the market. But for now, there appears very little concern to retract these late November gains back out of the feeder cattle market as traders focus on position taking opportunities before the Thanksgiving, partially due to extremely light volume. Open interest Monday lost 1,201 positions (33,310). Cash index for 11/20 is 171.51, down 2.88.

LEAN HOGS:

Opening call: Steady to 50 cents lower. Light to moderate pressure is expected to develop through the lean hog futures complex early Tuesday morning as follow-through pressure is expected to develop after Monday's losses. The lack of volume during the week is not surprising given the holiday, but the shift in direction from the cattle market is somewhat a new twist, as some would have expected the near-limit gains in live cattle futures would have helped to draw some light support to nearby lean hog trade. But it appears that hog contracts may remain stuck in the current range during the holiday week, which could allow for narrow price ranges over the next couple of trading days. Cash bids are 50 cents lower to $1 higher with most bids steady. Open interest Friday lost 1,244 positions (203,380). Spot month December fell 2,141 positions (34,857) and February added 343 positions (90,071). Cash lean index for 11/20 is 55.37, down 0.15. DTN projected slaughter numbers for Tuesday are 438,000 head, with Saturday's run expected to be around 365,000 head.

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

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Rick Kment