DTN Before The Bell Livestock

Livestock Markets Remain Subdued Early Tuesday Morning

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Nick Scalise)

GENERAL COMMENTS:

Feeder cattle futures are retracting earlier gains with $1 per cwt losses holding in several nearby contract months. The renewed buyer interest stepping back into corn prices is putting direct pressure on the feeder cattle market as higher production costs are once again a part of the conversation. Limited movement is seen in live cattle and lean hog trade with mixed prices keeping markets subdued. Corn is trading higher in light to moderate trade. Stock markets are mixed in morning trade. Dow Jones is 122 points higher with NASDAQ down 13 points.

LIVE CATTLE:

Open: Mixed. Activity in live cattle futures remains extremely subdued early Tuesday morning with prices hovering within a narrowly mixed range from 10 cents lower to 15 cents higher. The focus on April futures moving to long term highs over the past two sessions continues to spark renewed interest through the entire complex, although traders still remain concerned by the lack of consistent direction in beef values and cash markets. Beef in cold storage is at a three-year high, potentially creating additional uncertainty about the continued ability to clear beef product through early 2021. Cash cattle interest remains quiet, as the recent winter system moving across most of the upper Midwest has left most of Nebraska and Iowa buried in snow. A few asking prices are seen in the South at $114 per cwt, but asking prices are quiet in the North, and bids have yet to surface. It is likely that active cash market direction will not be seen until later in the week. Open interest rallied 4,352 positions (329,132). February contracts lost 2,059 positions (45,764) and April contracts added 2,433 positions (135,970). DTN projected slaughter for Tuesday is 116,000 head.

FEEDER CATTLE:

Open: $1 Lower. Feeder cattle futures have started out lower, although in the first few minutes, contracts have backed away from initial market lows. The renewed buyer support in the corn market is adding some concern to the entire feeder cattle complex, as the recent market support quickly followed a sell-off in grain trade. But as grain prices slowly but steadily regain market composure over the last couple of days, the focus may quickly turn to increased production costs of feeder cattle, allowing for moderate losses to develop. March feeder cattle futures still remain technically supported above $140 per cwt, although the recent volatility in the market could quickly change market direction in all nearby and deferred contracts. Cash index for 1/22 is $134.48, up 0.49. Open interest Monday lost 102 positions (40,571).

LEAN HOGS:

Open: Steady to 30 cents lower. Narrow losses have trickled into lean hog futures Tuesday morning as traders focus on position squaring activity following active gains over the past week. The depth of sell orders appears to be shallow, creating the indication that markets will stabilize over the near future as buying interest may move back into the complex. The ability to hold current price levels in nearby contracts is likely to spark follow through commercial interest through the upcoming days, holding prices at yearlong highs in most nearby contract months. Open interest gained 1,874 positions (214,900). February liquidated 1,865 positions (25,769) and April added 1,185 positions (90,191). Open interest in pork cutout futures fell 8 positions (1,194). Cash lean index for 1/22 is 65.88, up 0.33. DTN projected slaughter for Tuesday is 476,000 head. Saturday runs are expected at 224,000 head.

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

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Rick Kment