DTN Before The Bell Livestock

GENERAL COMMENTS:

Active losses in all livestock trade Thursday has quickly created concerns of further longer term market pressure in the complex. This may add selling interest as the session continues, and could further weaken short term fundamental market outlooks. Corn is trading mixed in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 157 points higher with NASDAQ up 60 points.

LIVE CATTLE:

Open: 20 cents to $1 lower. Firm market pressure is seen in all live cattle futures trade as nearby and deferred traders continue to focus on the lack of support in cash values and continued concerns surrounding feed and production costs. February futures have moved below $112 per cwt during initial trade, which is triggering additional widespread pressure in all nearby contracts, and could lead to active liquidation through the end of the week. Beef exports in the weekly export sales report posted sales of 16,800 metric tons, with shipments of 14,200 metric tons. South Korea and Japan led the weekly purchases with the combination of the two countries accounting for over half of the total export sales reported. Cash cattle trade took shape Wednesday afternoon with additional light to moderate trade taking place in all areas. Cash markets have slipped $1 to $4 per cwt from last week's levels, depending on the area. Bids remain quiet Thursday morning, although limited trade is possible over the next couple of days, but without a major shift in market direction, the tone of the market is likely to have been set. Open interest added 1,435 positions (311,251). February contracts lost 8,817 positions (69,454) and April contracts added 8,289 positions (115,733). DTN projected slaughter for Thursday is 116,000 head.

FEEDER CATTLE:

Open: Mixed. Initially mixed price moves in feeder cattle futures focused on spill-over buying support from Wednesday's session. But this support is quickly evaporating with futures holding light to moderate pressure as more volume moves back into the market. Traders continue to look for support at the $133 and $134 per cwt price levels in the respective January and March contracts, but limited long term buyer support is likely to move into the market given the continued pressure in live cattle trade. Cash index for 1/12 is $136.05, down 0.18. Open interest Wednesday fell 396 positions (41,523).

LEAN HOGS:

Open: Steady to $1 lower. Firm pressure developed in all lean hog futures early Thursday morning as traders continue to focus on the building pressure in nearby contracts as well as lack of underlying market support coming from the weekly export sales report. The most aggressive pressure continues to be seen in nearby contracts, although the difference Thursday morning compared to earlier in the week is the lack of buyer interest moving into deferred contract months. The $15 per cwt loss in pork belly cuts on Wednesday's pork cutout report created increased caution through the entire complex, leading to what could be further pressure in pork values. Pork export sales for the first week of January posted total sales of 23,100 metric tons sold. Total shipments are reported at 30,000 metric tons. Uniform distribution of current buying patterns were seen with Mexico leading the list of buyers with 6,600 mt, while Japan and South Korea rounded out the top 3 with 3,400 and 3,300 mt respectively. China purchases were limited to 1,600 mt, which is expected to create concern through the market if this trend continues. Limited market direction is expected to be seen following the weekly export sales report. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest gained 2,121 positions (206,662). February liquidated 7,195 positions (45,634) and April added 6,325 positions (73,833). Open interest in pork cutout futures fell 40 positions (1,147). Cash lean index for 1/12 is 65.48, up 0.99. DTN projected slaughter for Wednesday is 493,000 head. Saturday runs are expected near 256,000 head.

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

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