DTN Before The Bell-Livestock

Hog Futures Shift Lower

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

Firm pressure is starting to develop through livestock trade with lean hog futures showing the most aggressive pressure during initial morning trade. This is posting triple-digit losses in nearby contracts, with increased softness possible through the morning. Mixed live cattle markets are slowly eroding Wednesday as the overall weaker tone of the livestock complex is eroding previous support. Corn markets are higher in light early trade. Stock markets are higher. Dow Jones is 131 points higher with Nasdaq up 46 points.

LIVE CATTLE:

Open: Mixed. Moderate buyer interest stepped back into nearby contracts early Wednesday morning. But the lack of support through the rest of the complex was increasingly obvious and added market uncertainty to the entire complex. It is uncertain if current buyer interest in the market will be able to hold given the pressure in deferred trade as well as softness through the rest of the livestock complex. There is growing concern surrounding meat demand through the second half of the year while supplies are expected to remain strong. Cash cattle activity remains undeveloped with overall trade direction focused on the last half of the week. Asking prices and bids are still unavailable going into midweek. It is expected that there may be a few token bids floated through the day, as well as feedlot managers trying to get their foot on base. The expected winter weather storm and cold weather to follow will likely cause both sides to become more aggressive over the next two days. But this still may not be enough to cause active trade to develop until sometime Friday. Open interest Monday fell 521 positions (386,858). Spot month February contracts slipped 5,580 positions (72,115) and April contracts added 2,171 positions (145,725). DTN projected slaughter for Wednesday is 120,000 head.

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FEEDER CATTLE:

Open: Steady to $0.40 lower. Limited losses have trickled into feeder cattle futures as traders seem to be quickly backing away from any sense of support seen Tuesday. Trade remains extremely sluggish midweek as outside market moves are keeping most traders closely attuned to grain market moves which will significantly impact production costs and overall feeder cattle trade. Cash index for 1/14 is listed at $144.44 down $0.21. Open interest Tuesday slipped 395 positions (50,677).

LEAN HOGS:

Open: $0.50 to $1 lower. Traders have once again shifted the focus to overall market weakness following the abbreviated buying spree seen Tuesday. Nearby contracts are holding the most aggressive pressure, with losses seen at or near $1 per cwt in February through May contracts. Limited volume is seen at opening bell, which may keep traders on the defensive through most of the morning. This may add some additional softness to the complex through the rest of the week as the most recent pressure has pushed April contracts through January lows of $66 per cwt, with prices trading at $65.55 per cwt. There is likely to be some additional liquidation through the morning based on the uncertain support levels. Cash hog trade is steady to $1 lower. Most bids are steady. Open interest fell 79 positions (203,583). February fell 2,091 positions (36,445) and April added 1,874 positions (75,232). Cash lean index for 1/14 is $57.65 up 0.44. DTN projected slaughter for Wednesday is 477,000 head. Saturday runs are shaping up to be 150,000 head, but weather conditions will play a major factor in weekend slaughter.

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

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Rick Kment