DTN Before The Bell Livestock

GENERAL COMMENTS:

Firm gains have quickly and uniformly redeveloped in lean hog and feeder cattle futures as traders continue to focus on a pullback in grain prices and firm underlying support in market fundamentals. Live cattle trade is limited with prices mixed in a narrow range as traders focus on the upcoming cattle on feed results, and potential impact to market direction. Corn is trading lower in light to moderate trade. Stock markets are lower in morning trade. Dow Jones is 181 points lower with NASDAQ down 2 points.

LIVE CATTLE:

Open: Mixed. Unlike the firm support in feeder cattle and lean hog futures, live cattle trade is mixed in a narrow trading range. Nearby gains are being offset by narrow to moderate selling pressure in summer and fall contracts as traders look for potential shifts in inventory numbers in the afternoon cattle on feed report. The biggest number currently watched is the placement number during December. This will affect cattle supply levels through the second half of the year, predominately the third-quarter marketing levels. This creating some uncertainty with deferred price moves as traders are taking limited protection Friday morning. Weekly beef exports posted total sales of 24,500 metric tons, with shipments totaling 17,600 metric tons. Japan, South Korea, and Taiwan rounded out the top three sales destinations with sales of 4,900, 3,500 and 2,400 metric tons respectively reported. This is not expected to be a major market factor in trade Friday morning with traders primary focus on the upcoming cattle on feed report after markets close Friday. Cash cattle trade remains generally steady from last week's levels with trade at $110 live and $173 per cwt dressed setting the tone for the week. Although it is still uncertain where weekly averages will fall given the moderate trading range during the week, limited support in cash trade while futures and boxed beef values have surged higher is likely to limit late week support. Most of the needed trade for the week appears to be accomplished, but limited clean-up activity could be seen over the next several hours. Open interest rallied 2,572 positions (321,522). February contracts lost 2,235 positions (50,981) and April contracts added 1,290 positions (130,826). DTN projected slaughter for Friday is 118,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents higher. Follow-through buying is seen in feeder cattle futures with the most aggressive gains seen in late spring and early summer contracts. The combination of expected cattle placement reductions in the afternoon report and eroding corn prices is helping to bring firm buyer support back to the complex at this point. Traders are looking for a 3% fall in placements during December, but any decrease above this projected level is likely to spark additional market support early next week. With March feeder cattle futures hovering just below $140 per cwt Friday morning, potential end-of-week adjustments could cause some additional price shifts over the next several hours. Cash index for 1/20 is $133.19, up 0.38. Open interest Thursday fell 310 positions (40,053).

LEAN HOGS:

Open: Steady to 60 cents higher. Growing fundamental and technical support continues to develop in nearby lean hog futures with all contracts posting higher prices Friday morning. April futures have moved above short term resistance levels of $74.10 per cwt, sparking renewed interest through the entire complex, and pushing prices to the highest April price since before the pandemic. The ability to close above these levels would likely spark renewed momentum in all contracts, which opens the door for trade between $75 and $77 per cwt in April futures over the coming days and weeks. Spot February contracts continues to see open interest erosion, but prices are closing in on $70-per-cwt price levels, which may spark renewed interest over the near future. Pork exports reported a total of 45,200 metric tons of pork sold last week, while 40,800 metric tons were shipped through export channels. Sales to China was slightly disappointing at 9,700 mt, which listed the country in third place of weekly buyers, behind Mexico and Canada. Although this is not the significant export market win that some were hoping for, it is not expected to carry a significant bearish tone at opening bell, likely having little direct impact on morning trade. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents higher. Open interest gained 1,393 positions (209,630). February liquidated 1,527 positions (28,997) and April added 1,223 positions (86,978). Open interest in pork cutout futures added 104 positions (1,155). Cash lean index for 1/20 is 65.40, down 0.27. DTN projected slaughter for Friday is 489,000 head. Saturday runs are projected at 324,000 head.

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

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