DTN Before The Bell Livestock

Trader Adjustments Shift Livestock Prices Lower

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

GENERAL COMMENTS:

Feeder cattle futures continue to adjust to the renewed support in corn prices, although the majority of last week's gains continue to hold. Light to moderate pressure is seen in live cattle and lean hog trade as traders look for opportunities to adjust positions following the recent market surge. Corn is trading higher in light to moderate trade. Stock markets are lower in morning trade. Dow Jones is 458 points lower with NASDAQ down 227 points.

LIVE CATTLE:

Open: Steady to 60 cents lower. Firm pressure is starting to slowly develop in live cattle futures, despite the still strong technical and fundamental support seen in the market. There continues to be underlying support well above $119 per cwt in April futures, but with prices still trading $3 above these levels, traders are starting to adjust positions following the recent gains. This could lead to moderate market shifts, but still not change the firm tone seen across the complex over the next couple of weeks. Traders are looking ahead to Friday's cattle inventory report as well as further moves in boxed beef prices. This could help to confine prices within the top end of the current market range. Cash cattle activity still remains at a standstill for the week with bids still hard to pin down. Asking prices are increasing given the underlying support in futures and boxed beef values, but may still not be readily seen until late Wednesday or sometime Thursday. Asking prices in the South are at $115 and higher, but still hard to find consistent levels on dressed basis in the North, although asking prices of $178 to $180 would not be out of line. The expectation that cash values will be significantly elevated this week due to support through the rest of the complex should help to firm bids once then develop. This still may not cause trade to develop before the end of the week. Open interest rallied 1,037 positions (330,170). February contracts lost 4,224 positions (41,540) and April contracts added 2,314 positions (138,285). DTN projected slaughter for Wednesday is 119,000 head.

FEEDER CATTLE:

Open: Steady to $1 lower. Firming corn market moves continue to be the main driver in live cattle futures with nearby contracts testing further losses as prices are holding 90 cent to $1 per cwt losses in opening trade. The majority of last week's gains are still holding in nearby feeder cattle trade, even though feed prices have regained most of the losses. The potential for further selling develops as traders may soon become cautious given the aggressive upward shift in beef prices and live cattle trade over the last three weeks. This could lead to market contractions over the coming days, although firm longer-term support is still holding across the entire cattle complex. Cash index for 1/25 is $134.96, up 0.48. Open interest Tuesday lost 248 positions (40,324).

LEAN HOGS:

Open: Steady to 50 cents lower. Buyer support appears to have temporarily ran out of gas following the strong upward shift over the last week. This is allowing early pressure to develop in all lean hog contracts, although the underlying tone of the market still remains firm with upward potential still developing in the market cycle. The continued and aggressive move higher in grain trade over the last two days is adding some concern to nearby lean hog futures prices. This may limit downside price shifts Wednesday beyond typical position adjustments. Open interest gained 4,816 positions (219,716). February liquidated 586 positions (25,183) and April added 1,448 positions (91,639). Open interest in pork cutout futures fell 4 positions (1,190). Cash lean index for 1/25 is 66.23, up 0.35. DTN projected slaughter for Wednesday is 492,000 head. Saturday runs are expected at 247,000 head.

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

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Rick Kment