DTN Before The Bell Livestock

GENERAL COMMENTS:

Feeder cattle futures continue to show increased market pressure with traders looking for additional interest and buying evident in grain trade. This will keep livestock traders cautious despite the technical optimism seen over the last two weeks. Corn is trading higher in light to moderate trade. Stock markets are higher in morning trade. Dow Jones is 384 points higher with NASDAQ up 98 points.

LIVE CATTLE:

Open: Mixed. Renewed support is trickling into spring and summer live cattle futures with prices regaining midweek losses. The selling pressure over the last two days has focused more on position-squaring opportunities with the underlying fundamental and technical support still helping to focus on long-term market support. Cash cattle markets started to trickle in Wednesday, although more significant movement is likely to develop over the next couple of days. Although prices are expected to remain higher, the jury is still out on how much end-of-week support will develop through the complex as feeders hold to elevated asking prices in order to make up for lost margins over the last few weeks. Asking prices in the South are at $115 and higher and $182 and higher in the North. Although packer interest is expected to continue to improve through the day, overall cash trade may trickle into the market over the next two days. It is possible that some trade may be delayed until after the Cattle Inventory report is released Friday. Beef exports last week continued to post extremely strong movement with a total of 28,800 metric tons reported sold. Total net shipments was reported at 17,400 metric tons with increased focus on strong movement to usual end destinations with Japan and South Korea posting another very strong purchase through the end of last week. This continues to be one of the underlying factors behind the fundamental and technical market gains seen over the last two weeks, as this type of active beef movement into global markets is expected to continue through the next couple of months. Open interest rallied 1,085 positions (331,238). February contracts lost 1,477 positions (40,063) and April contracts added 808 positions (139,076). DTN projected slaughter for Thursday is 119,000 head.

FEEDER CATTLE:

Open: Mixed. Despite continued support in grain prices Thursday morning, feeder cattle futures appear to remain mixed with spot contracts trading slightly higher, while follow-through pressure is developing in deferred contracts. Feeder cattle trade continues to be heavily affected by the movement in the grain trade, although a strong portion of previous gains have held despite higher corn prices. This is expected to create additional buying opportunities in nearby and deferred futures with most contracts holding near or above $140-per-cwt levels. Cash index for 1/26 is $134.96, up 0.48. Open interest Wednesday lost 439 positions (39,885).

LEAN HOGS:

Open: Steady to 20 cents lower. Market stability is seen in lean hog futures early Thursday morning. Although the support from weekly export sales reports has not been able to push prices higher in the early minutes of trade, the focus on active product movement and fundamental support has quickly offset midweek price pressure. Spillover position adjustments still remain on the books, allowing for narrow market softness Thursday, but the underlying tone across the entire lean hog complex continues to remain firm, creating expectations of renewed buyer support once initial sell orders clear the market. Weekly export sales posted extremely strong sales of 52,900 metric tons. This was complimented by aggressive shipments of pork last week of 39,600 metric tons. Mexico was on top of the leader board with 18,900 mt of pork purchased during the week, while China came in second, with a still very strong purchase total of 13,900 mt. This is expected to continue to drive underlying support in pork demand as buyers continue to aggressively source U.S. pork products. Open interest gained 965 positions (220,669). February liquidated 2,686 positions (22,497) and April added 885 positions (92,524). Open interest in pork cutout futures added six positions (1,196). Cash lean index for 1/26 is 66.23, up 0.35. DTN projected slaughter for Thursday is 494,000 head. Saturday runs are expected at 247,000 head.

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

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