DTN Before The Bell Livestock

GENERAL COMMENTS:

Live cattle have started mostly lower Wednesday morning as traders slowly back away from previous gains. Very little directional shifts are seen in the lightly traded markets Wednesday as narrow to moderate price shifts are likely to continue through most of the morning. Continued gains in hog futures continues to test resistance levels and the potential to push prices to highs not seen since last spring. Corn is trading higher in light to moderate trade. Stock markets are mixed in limited morning trade. Dow Jones is 239 points higher with NASDAQ down 86 points.

LIVE CATTLE:

Open: Mixed. Early trade is mixed to mostly lower as traders are focused on adjusting positions following aggressive triple digit gains Tuesday. The wild market swings over the past two trading sessions has created increased opportunities during early January. Trade volume still remains extremely limited during initial trade activity, although the positive moves seen Tuesday is helping to divert potential follow through losses in the coming days. Traders will be closely monitoring grain trade as well as increased movement in outside markets over the coming days. This should still keep prices range bound within the wide, but sideways trading ranges. Cash cattle markets are still quiet Wednesday morning, although it is expected some market interest will start to develop through the day. The potential that some trade may develop Wednesday is there, but it is likely to be sometime Thursday or Friday before the majority of trade develops, leaving growing uncertainty given the back and forth shifts in futures values and boxed beef prices. Feeders still remain aggressive with asking prices at or above $114 per cwt live in the South, while Northern cattle prices are hard to pin down. Open interest rallied 3,243 positions (295,121). February contracts lost 591 positions (105,169) and April contracts added 826 positions (82,826). DTN projected slaughter for Wednesday is 119,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents lower. Early trade in feeder cattle futures are quickly backing away from previous gains with initial price moves posting 40 to 50 cent losses Wednesday morning. As more trade volume slowly moved back into the complex, these losses moderated a bit, allowing for the potential of buyers to step back into the complex. Concerns surrounding further gains in corn markets with front-month corn futures testing the $5 per bushel level will continue to put the brakes on any significant market support in feeder cattle trade. Cash index for 1/4 is $136.13, down $0.43. Open interest Tuesday fell 449 positions (42,455).

LEAN HOGS:

Open: Steady to 50 cents higher. Firm gains are seen in all lean hog futures trade with the focus on nearby contracts as prices continue to test resistance levels. A move above October highs through the end of the session would not only signify potential follow through technical support, but continued focus on long-term market strength based on pork demand growth. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents higher. Open interest added 3,633 positions (201,744). February slipped 251 positions (78,102) and April added 1,987 positions (49,268). Open interest in pork cutout futures added 18 positions (1,088). Cash lean index for 1/4 is $61.47, up 0.85. DTN projected slaughter for Wednesday is 495,000 head. Saturday runs are expected near 385,000 head.

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

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