DTN Before The Bell-Livestock

GENERAL COMMENTS

Moderate to strong buyer support continues to develop through the live cattle complex. This continues to be driven by aggressive triple-digit gains in February live cattle contracts. The hog market is under pressure once again with concerns that further pressure will quickly develop in cash markets and bring additional liquidation to the entire market. Corn markets are trading lower in light trade activity. The stock market is trading mixed in light early trade. Dow Jones is 28 points higher while Nasdaq is down 11 points.

LIVE CATTLE:

Opening call: Steady to $1.50 higher. Aggressive market support has flooded back into front month February live cattle futures. The thinly traded front contract month due to very light open interest still remaining in the February contracts. Outside the front-month contracts, buyer support is redeveloping, but much less aggressive than the triple digit shifts in February futures. February contracts are holding at $122.87 per cwt which is aggressively widening the price spread between the February and April contract month. Cash cattle markets appear to be generally done for the week following the moderate to active trade which developed through the day Wednesday. Prices are generally $5 to $6 per cwt higher than last week's levels. There could be some clean up trade developing through the next couple of days, but the tone is set on cash trade at this point. Open interest Wednesday fell 454 positions (326,513). Spot February liquidated 2,319 positions (3,987) and April contracts fell 1,071 positions (130,864). DTN projected slaughter for Thursday is 114,000 head.

FEEDER CATTLE:

Opening call: Steady to 50 cents higher. Nearby feeder cattle futures are gaining light momentum as traders focus on the aggressive triple-digit moves seen in February live cattle futures. Tight trading ranges continue to be seen between 27 and 32 cents per cwt in nearby contracts which is helping to draw underlying support into the market. Cash lean index for 2/21 is $127.12, down $0.06. Open interest Wednesday added 730 position (51,686).

LEAN HOGS:

Opening call: Steady to $1 lower. Additional pressure is quickly developing through the lean hog futures complex with traders focusing on the nearby contracts slipping nearly $1 per cwt lower. There is expected to be increased concern surrounding eroding cash hog prices through the end of the week. As April futures have fallen below the $70 per cwt threshold, very limited support remains seen in cash markets as traders move closer to December support levels of $65.83 per cwt. A move below that level through the end of the week is likely to spark additional liquidation over the next few trading sessions. Cash bids are $1 to $2 lower with bids scattered through the range. Open interest Wednesday liquidated 1,893 positions (227,736). Spot month April fell 2,540 positions (94,915) and June slipped 157 positions (54,258). Cash lean index for 2/21 is $77.64, up $0.40. DTN projected slaughter for Thursday 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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