DTN Before The Bell Livestock

GENERAL COMMENTS:

Initial trade is mixed to mostly lower across cattle trade, while lean hog futures are aggressively pulling back from previous gains. The lack of support in deferred lean hog futures contracts is causing some additional caution through the rest of the market with spot contracts leading the market lower. Cattle futures seem to be less convinced that an aggressive sell-off will develop, but unwilling to continue to move higher during early trade. Corn is trading lower in light to moderate trade. Stock markets are higher in morning trade. Dow Jones is 185 points higher with NASDAQ up 138 points.

LIVE CATTLE:

Open: Mixed. Early trade is mixed to mostly lower in live cattle futures with traders are slowly but steadily backing away from strong late week gains. The lack of consistent support in boxed beef and cash cattle markets over the last couple of weeks is limiting upward price support Tuesday morning, although the general tone of the market is expected to remain firm most of the week based on previous gains and market shifts. Cash cattle markets remain quiet Tuesday while limited interest is seen from packers or feeders at this point. It is likely to be midweek or later before trade develops, although feeders are aggressively focusing on regaining last week's losses based on the need for cattle by packers in order to fuel current plant speeds. Open interest added 662 positions (321,872). February contracts lost 3,810 positions (65,020) and April contracts added 10,974 positions (126,707). DTN projected slaughter for Tuesday is 118,000 head.

FEEDER CATTLE:

Open: Mixed. Limited activity is seen Tuesday morning as traders continue to be caught in the middle between active late week gains last week and concerns that buying support appears to have cooled significantly in early week trade. Although prices are mixed in a moderate trading range, the potential for renewed buyer support is developing in spring contracts. Corn prices continue to remain high, leaving many traders cautious of current feeder cattle prices, but with nearby contracts likely hitting support levels last week, there continues to be firm underlying buyer support developing across the entire complex. Cash index for 1/15 is $134.05, down 0.18. Open interest Friday fell 318 positions (41,632).

LEAN HOGS:

Open: 30 to 90 cents lower. Firm pressure is redeveloping in lean hog futures trade as nearby contracts continue to lead the market lower, retracting Friday's gains. The optimism seem in the complex late last week seems to have evaporated, although little has changed fundamentally or technically through the entire complex. The inability to stabilize pork cutout values during the first two weeks in January has led to aggressive wide price swings in individual pork cuts, and created wide and volatile market swings. This is expected to keep futures trade variable over the near future. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest fell 508 positions (210,139). February liquidated 5,922 positions (39,712) and April added 6,790 positions (80,623). Open interest in pork cutout futures is unchanged (1,114). Cash lean index for 1/15 is 65.56, up 0.39. DTN projected slaughter for Tuesday is 496,000 head.

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

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