DTN Before The Bell Livestock

GENERAL COMMENTS:

Confident buyers of lean hog futures were still present at the open Friday morning, but live cattle and feeder cattle futures seem to be pulling back from past gains. An end-of-week session can be vulnerable to profit-taking, especially from those who have lately chased the contract highs in lean hogs. Corn is trading 2 1/2 cents lower in quiet trade. Stock markets are higher Friday morning, with the Dow Jones up 134.62 points and the NASDAQ up 14.89 points.

LIVE CATTLE:

Open: 10 to 20 cents lower. The nearby February contract is down $0.05 at $116.40 and the April contract is down $0.25 at $123.50. Trading volume in live cattle futures (and feeder cattle futures) has been relatively quiet so far this week. As long as nothing dramatic happens to spark a sell-off, relative calm may continue to reign through Friday's session. That leaves the cash cattle market to decide how bullish the week's business is going to be, as most of it has yet to take place. Light trade was reported Thursday in parts of Nebraska at $178 to $180, which is steady to mostly $2 higher than a week ago. Asking prices in the South remain firm at $115, and the cattle that are left to trade in the North are set at $182 to $185. DTN projected slaughter for Friday is 116,000 head, with another 62,000 head projected for Saturday. On Thursday, total open interest in live cattle futures added 2,281 positions (327,091). The February contract lost 1,052 positions (25,580) and the April contract added 2,254 positions (142,499).

FEEDER CATTLE:

Open: Lower. The volatility in corn prices from a couple of weeks ago now seems to have trickled into a quiet sideways trade, not offering much direction one way or another for feeder cattle futures. Note that feed prices are still relatively high: the DTN National Corn Index (an average of cash bids across the country) reached $5.34 per bushel this week, higher than it's been since 2013. But in similar historic terms, nearby feeder cattle futures under $140 per cwt might seem underpriced, well within their average trading range since 2015. At the start of Friday's session, the nearby March contract is down $0.725 at $138.775 and the April contract is down $0.50 at $142.175. Lighter feeder calves have been doing well at sale barns this week, fetching prices generally $1 or $3 higher than last week, and demand remains good. The CME Feeder Cattle Index for Feb. 3 was down $0.17 to $136.27. On Thursday, total open interest lost 328 positions (39,754). The March contract lost 385 positions (18,126) and the April contract added 51 positions (6,434).

LEAN HOGS:

Open: Higher. The nearby February contract is up $0.05 at $71.075 and the April contract is up $0.175 at $79.475. Lean hog futures have been the star of the livestock futures sector this week, toying with the $80 level for three straight days on the April chart, and trading as high as $89.45 on the July chart at one point Wednesday. As always on Friday after a week of big trading volume that's attracted fresh trend-following speculators, the market could be susceptible to a profit-taking selloff at some point during the session. On Thursday, total open interest grew by 2,694 positions (232,768). The February contract liquidated 1,324 positions (13,197) and the April contract added 2,053 positions (99,057). Open interest in pork cutout futures added 78 positions (1,579). The CME Lean Hog Index for Feb. 3 is 69.09, down 0.08. DTN projected slaughter for Friday is 492,000 head, with another 313,000 head projected for Saturday.

Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at masteringthegrainmarkets@gmail.com or on Twitter @elainekub.

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