DTN Before The Bell Livestock

GENERAL COMMENTS:

Eager buying interest is still present for lean hog futures at fresh contract highs Friday morning, and the cattle contracts are higher too. Heavy trading volumes may be noted ahead of the three-day weekend. Corn futures are trading up 1 1/2 cents. Stock markets are lower Friday morning, with the Dow Jones down 38.67 points and the NASDAQ down 37.89 points.

LIVE CATTLE:

Open: Higher. The nearby February contract is up $2 at $117.325 and the April contract is up $1.175 at $124.30. The Presidents Day holiday will keep livestock futures markets closed on Monday and may motivate extra liquidation volume Friday as traders take the opportunity to close out positions. Since speculators have been heavily net-long in live cattle futures, liquidation pressure now would be bearish. On the other hand, live cattle have a higher trend and generally supportive fundamentals to keep traders invested and pursuing triple-digit gains Friday morning. In the cash cattle market, another light round of trade developed Thursday afternoon with southern live cattle bringing $114 and northern dressed cattle bringing $180. Otherwise, feedlots are holding out until the last minute, confident that packers need cattle yet this week, with asking prices around $115 to $116 in the South and $185 in the North. Projected slaughter for Friday is 110,000 head, followed by 64,000 head projected for Saturday. On Thursday, total open interest lost 524 positions (326,965). The February contract lost 2,720 positions (9,589) and the April contract added 808 positions (148,062).

FEEDER CATTLE:

Open: Mixed. Super cold weather and a wide band of snow across cattle country are not particularly helpful to operations that are calving or even just keeping water tanks open. It's also likely to keep the movement of animals in and out of sale barns or feedlots relatively quiet for now. But looking forward through time, traders are supportive to feeder cattle futures prices Friday morning. The nearby March contract is up $0.50 at $139.65 and the April contract is up $0.475 at $143.85. Ahead of the three-day holiday, feeder cattle futures are likely to have a fifth straight session of heavy trading volumes but potentially neutral price movement. The CME Feeder Cattle Index for Feb. 10 was down $0.16 to $135.49. On Thursday, total open interest added 465 positions (42,050). The March contract lost 630 positions (13,865) and the April contract added 780 positions (11,313).

LEAN HOGS:

Open: Higher. The nearby February contract is up $0.125 at $74.15 and the April contract is up $0.15 at $84.40. Grains are up, crude oil is up, the dollar is up and stock markets are hovering near their all-time highs, so perhaps it's not too surprising that lean hog futures are enjoying continued buying interest too and that contracts are hitting fresh highs. Rumbles about the inflation outlook for mid-2021, following an expected pandemic recovery, may keep speculative investors interested in long lean hog futures positions. More specifically in the pork market, cutout values have been churning higher led by the price expectations for bacon (bellies). Thursday's pork cutout closed up $2.01 at $88.87. On Thursday, total open interest in lean hog futures grew by 2,509 positions (247,692). The February contract liquidated 550 positions (8,113) and the April contract added 142 positions (101,728). Open interest in pork cutout futures added 60 positions (1,824). CME Lean Hog Index for Feb. 10 popped higher again by $0.62 to $72.36, extending a series of day-to-day all week. Friday slaughter numbers are projected near 493,000 head, and the Saturday run is expected at 217,000 head.

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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