DTN Before The Bell Livestock

GENERAL COMMENTS:

The shift lower in lean hog and feeder cattle futures Wednesday morning quickly caused all livestock markets to pull back from previous support. Little has changed fundamentally, allowing prices to bounce lower, but remain well entrenched in current trading ranges. Corn is trading higher in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 26 points lower with NASDAQ down 2 points.

LIVE CATTLE:

Open: 20 cents to 50 cents lower. Light but distinctive pressure is seen in all live cattle futures early Wednesday morning. December live cattle futures, although remaining very lightly traded, is leading the complex lower based on concerns that fundamental pressure in both cash cattle and boxed beef prices may erode previous support in futures trade. Even with the current market pressure, nearby live cattle contracts remain well entrenched within the sideways trading range, allowing for further market shifts over the upcoming days. Cash cattle trade remains at a near standstill going into Wednesday morning. The limited interest from either side during the week appears that active trade may be delayed until sometime Thursday or Friday. Given the price separation between futures markets and boxed beef prices, the direction of cash cattle prices at the end of the week will be a "battle of the wills." Despite the fact that packers needs for cattle will be decreased through the holiday weeks, it is still important to remember that packers will maximize production at least three days a week during the holiday breaks, and year-over-year processing schedules are not likely to be significantly altered. This will keep packers in the market for moderate runs of cattle through the end of the year. Asking prices remain sketchy in the North, while $110 per cwt continues to be the focus on live cattle in the South. 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 1,060 positions (285,434). December contracts lost 697 positions (6,832) and February contracts lost 34 positions (113,741). DTN projected slaughter for Wednesday is 120,000 head.

FEEDER CATTLE:

Open: 30 cents to $1.25 Lower. Firm underlying pressure is quickly developing in spot-month feeder cattle futures. The combination of pressure in live cattle trade and renewed buyer support in the corn market continues to focus on the ability to pull back from recent support levels near $140 per cwt. Nearby contracts still remain firmly placed above initial support levels, but the lack of follow-through buyer support could quickly change the direction of the market through the end of the year. As increased volume moves into the market Wednesday, the focus on defending price levels at $137.02 set last week. Cash index for Dec. 14 is $136.69, up 0.12. Open interest Tuesday gained 218 positions (42,270).

LEAN HOGS:

Open: Steady to $1 Lower. Lean hog traders focused more on the daily direction of pork cutout values Tuesday than typically seen over the last week. The lack of stability in pork prices may continue to leave markets looking for another short but defined downturn as traders are unable to break through resistance levels midweek. February futures are leading the market lower, although the rest of the complex remains much more subdued as traders seem to be focusing on building stability into the complex and protecting recent gains. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents higher. Open interest added 171 positions (190,435). February fell 457 positions (81,876) and April added 531 positions (40,175). Open interest in pork cutout futures gained 25 positions (669). Cash lean index for Dec. 14 is $65.06, up 0.10. DTN projected slaughter for Wednesday is 483,000 head, reduced due to mechanical and weather issues. Saturday runs are expected at 370,000 head.

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

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