DTN Before The Bell-Livestock

GENERAL COMMENTS

Livestock futures are mostly lower in light to moderate trade volume developing through the complex. Early short covering is starting to develop in nearby lean hog trade, although the general tone of the market remains under pressure based on continued weakness in fundamentals. Cattle futures are shifting lower as position taking is seen in live cattle trade following the recent market support. Corn markets are trading lower in light trade activity. The stock market is trading lower in light early trade. Dow Jones is 46 points lower while Nasdaq is down 22 points.

LIVE CATTLE:

Opening call: Steady to 50 cents lower. Narrow to moderate losses are developing through the live cattle futures complex early Friday morning. Most of the market shift is focusing on position taking as traders continue to adjust to lower market shifts following the strong gains seen in nearby contracts. Deferred pressure is most evident through the morning with traders looking for uncertainty in long term beef demand as well as the potential for additional pressure possible in feeder cattle markets through the end of the month. Cash cattle markets are expected to be done for the week following the surge of price levels and activity seen Wednesday. There is still the potential for some clean up trade to develop through the day, but for the most part cash markets are likely to wait until next week and take into account the afternoon cattle on feed results as packers and feeders regroup over the weekend. Open interest Thursday added 838 positions (327,084). Spot February liquidated 1,329 positions (2,658) and April contracts fell 1,208 positions (129,436). DTN projected slaughter for Friday is 111,000 head.

FEEDER CATTLE:

Opening call: Steady to 50 cents Lower. Lack of follow through support in live cattle markets late in the week as well as the inability for buyers to actively step into the feeder cattle market during the week while live cattle futures surged higher is causing some moderate late week pressure to the complex. Traders are also starting to factor in increased feeder placement expectations into the market with most traders looking for the cattle on feed report to post a 10% increase in placements over year ago levels. Most of this increase in placements is already factored into the market price, but traders are still remaining concerned over the potential that the report could carry a bearish tone, thus some are quickly taking protection. Cash lean index for 2/22 is $127.41, down $0.29. Open interest Thursday added 646 position (52,281).

LEAN HOGS:

Opening call: Mixed. Light trade activity in a narrow trading range is expected to be seen through most of the morning. The sharp losses over the previous two sessions has not only filled the desire of most sellers in the market, but it is also creating some moderate short covering opportunities at the end of the week. Prices are expected to hover between 25 cents lower to 25 cents higher through most of the morning, although the continued pressure in cash markets is likely to limit the upside potential of the market. Cash bids are $1 to $2 lower with bids scattered through the range. Open interest Thursday liquidated 3,333 positions (224,371). Spot month April fell 3,562 positions (91,343) and June added 147 positions (54,394). Cash lean index for 2/22 is $77.73, up $0.09. DTN projected slaughter for Friday is 410,000 head. Saturday's runs are expected to be 122,000 head.

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

(SK)

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