DTN Before The Bell Livestock

GENERAL COMMENTS:

Mixed markets are developing Wednesday morning with additional price pressure in live cattle and feeder cattle trade offset by aggressive hog market support. The movement in grain markets will continue to be a significant factor in price moves due partially to very limited trade volume during the holiday week. Corn is trading mixed in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 132 points higher with NASDAQ up 44 points.

LIVE CATTLE:

Open: Steady to 50 cents lower. Light to moderate pressure is seen in live cattle futures as traders add to previous losses seen Tuesday. The limited volume in the market is likely to keep markets under pressure without a significant shift in outside market moves during the day. December live cattle futures remain very thinly traded, but hold the most pressure after opening bell Wednesday. This could add further market shifts through the rest of the week, although market activity is expected to remain very light. Cash cattle markets are still quiet Wednesday morning with asking prices still holding to early-week levels despite the shift lower in futures prices Tuesday. Cattle are priced at $112 and higher live in the South, while dressed asking prices are still spotty midweek. Packer interest is expected to improve through the morning with the expectation that both sides will want to wrap up business by midday Thursday at the latest ahead of the New Year's holiday Friday. Open interest added 2,255 positions (290,645). December contracts lost 625 positions (227) and February contracts fell 590 positions (110,887). DTN projected slaughter for Wednesday is 119,000 head.

FEEDER CATTLE:

Open: 50 cents to $1 lower. Feeder cattle futures are still reeling from the sharply higher grain markets seen over the last two days. Although grain traded has started lower, the underlying tone of higher prices during the holiday limited trade will continue to impact feeder cattle markets through much of the week. It is likely that the impact of the corn market rally over the last three weeks has not been worked through the cattle complex, with feeder cattle futures likely to feel the brunt of the higher production costs initially. The ability for January futures to hold prices above $139 per cwt through the week will remain significant, as a move below these levels could open up downward market pressure in the coming weeks. Cash index for 12/28 is $138.40, up $0.11. Open interest Tuesday fell 702 positions (44,479).

LEAN HOGS:

Open: 30 cents to $1 higher. Strong spillover support seen in nearby lean hog futures compliments the growing support through the lean hog futures complex. Aggressive losses in cattle trade over the past two days has opened up additional market support in the hog complex with some traders transitioning from the cattle complex back into the hog market as technical support levels may be reached. This could give investment traders renewed confidence in the potential growth of nearby lean hog futures based on active demand and potential growth in domestic and export markets. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest added 1,285 positions (188,563). February fell 95 positions (78,051) and April added 459 positions (44,173). Open interest in pork cutout futures added 31 positions (767). Cash lean index for 12/28 is $59.93, down 0.67. DTN projected slaughter for Tuesday is 488,000 head. Saturday runs are expected at 336,000 head.

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

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