DTN Before The Bell-Livestock

GENERAL COMMENTS

Moderate to strong price pressure has quickly encompassed nearby lean hog futures with active selling pressure developing midweek. The overall lack of support in early cash market direction may add to the pressure. Cattle trade remains mixed to slightly higher although very narrow trading ranges continue to be seen through the complex. This may allow prices to chop around through much of the morning as traders try to establish market direction once again. Corn markets are trading higher in light trade activity. The stock market is trading lower in light early trade. Dow Jones is 36 points lower while Nasdaq is down 17 points.

LIVE CATTLE:

Opening call: Steady to 30 cents Higher. Light buyer support is slowly trickling into the live cattle complex early Wednesday. The overall lack of direction and activity in cash markets as well as firm nearby support seen late Tuesday in February contracts is allowing buyers to slowly but cautiously step back into the complex. It is uncertain at this point just how much buyer support remains nested under this initial move higher. This could allow markets to wander in a narrow to moderate range through much of the trading session. Cash cattle activity is extremely quiet early Wednesday morning following lack of development in the cash complex through the first couple days of the week. Bids may start to develop through the day, but it may be Thursday before packers become serious about floating bids at this point. It is not unlikely that active trade will be seen sometime Friday with a delayed movement after the cattle on feed report very possible. Open interest Tuesday added 881 positions (327,188). Spot February liquidated 1,281 positions (6,306) and April contracts fell 881 positions (132,164). DTN projected slaughter for Wednesday is 114,000 head.

FEEDER CATTLE:

Opening call: Mixed. Trade is expected to remain in a narrowly mixed trading range through the first few minutes of trade Wednesday. The firm buyer support which developed Tuesday has left traders somewhat uneasy about quickly stepping back into the market to continue buying. But at the same time, there is expected to be some additional underlying support developing in the complex following the firm gains in live cattle markets and potential to bring some additional stability to the feeder cattle complex. All feeder cattle contracts between March and September contract months are trading within a $1 per cwt trading range. This consistency through the spring, summer and fall, may bring some additional commercial interest back into the market over the coming weeks. Cash lean index for 2/20 is $127.18, down $0.11. Open interest Tuesday fell 284 position (51,009).

LEAN HOGS:

Opening call: Steady to $1 lower. Follow through pressure after the turn lower Tuesday in nearby contracts is expected to bring additional selling activity into the market early Wednesday morning Front month April futures are expected to lead the market lower, which could quickly turn into triple digit losses across the complex. The pressure in cash values early in the day as well as front month futures unable to hold onto $70 per cwt price levels may spark additional liquidation during most of the session. Cash bids are steady to $2 lower with most bids steady. Open interest Tuesday liquidated 303 positions (229,634). Spot month April fell 2,765 positions (97,457) and June added 970 positions (54,415). Cash lean index for 2/20 is $77.24, up $0.68. DTN projected slaughter for Wednesday is 443,000 head. Saturday's runs are expected to be 105,000 head.

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

(SK)

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