DTN Before The Bell Livestock

GENERAL COMMENTS:

Sharp losses are developing in feeder cattle futures following aggressive renewed price surges in corn and soybean markets. This is putting pressure on live cattle futures which are quickly backing away from last week's gains. Corn is trading higher in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 156 points lower with NASDAQ down 21 points.

LIVE CATTLE:

Open: Mixed. Live cattle futures are mixed Monday morning as the bearish tone seen in feeder cattle futures based on elevated grain prices is causing weakness through nearby contracts. Slight gains still are holding in deferred late 2021 contracts as the focus on tighter supplies continues to add uncertainty to the market. The underlying weakness in nearby contracts is likely to carry additional pressure through the entire market most of the morning. Cash cattle markets remain quiet Monday morning with packers returning to a full weekly schedule for the first time in three weeks. With the holidays in the rearview mirror, the focus on recent cash market support and active packer needs will keep feeders aggressive when it comes time to price cattle. Bids and asking prices are not expected to develop until sometime Tuesday or Wednesday, with active trade potentially delayed until late in the week. Open interest slipped 873 positions (289,783). December contracts lost 172 positions (55) and February contracts fell 1,111 positions (109,776). DTN projected slaughter for Thursday is 115,000 head.

FEEDER CATTLE:

Open: 25 cents to $1 lower. Early-week pressure in feeder cattle trade has more to do with traders adjusting to contract highs in grain markets rather than a change in direction in overall beef values in the near future. The recent surge in corn prices has significantly disrupted the potential for a bullish start of 2021 in both feeder cattle and live cattle markets based on surging production costs coming from the feed sector. Late spring and summer contracts continue to post the most significant losses early Monday morning with the expectation that this rally in corn prices may not be as short-lived as previously hoped. Cash index for 12/30 is $138.77, up 0.06. Open interest Thursday added 502 positions (43,631).

LEAN HOGS:

Open: Steady to $1 higher. Firm spillover support developed in lean hog futures at opening bell. Traders are assessing the strength of the market following aggressive triple-digit gains seen Thursday before the long holiday weekend are focusing on the ability to draw additional trade interest during early 2021. The potential to spark additional domestic and export pork demand through the first quarter of the year is helping to test two-month highs, creating the potential for renewed technical buyer 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 added 4,169 positions (193,877). February gained 1,647 positions (79,402) and April added 962 positions (45,762). Open interest in pork cutout futures added 95 positions (882). Cash lean index for 12/30 is $60.07, up 0.21. DTN projected slaughter for Monday is 488,000 head.

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

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