DTN Before The Bell-Livestock

GENERAL COMMENTS

Strong pressure is quickly developing in cattle futures Friday morning. This is helping to draw additional market activity in both live cattle and feeder cattle markets. The triple-digit losses are creating concern of additional follow-through pressure possible through the end of the week. Corn futures are mixed in light trade. Stock market futures are higher, Dow Jones is 58 points higher while Nasdaq is up 23 points.

LIVE CATTLE:

Open: Steady to $1.50 lower. Follow-through pressure is developing across the entire live cattle complex as traders are not only affected by the lack of support seen over the last two trading sessions, but aggressive losses in feeder cattle trade has allowed for markets to move sharply lower in the early minutes of trade Friday. This may bring about additional price pressure through the end of the week, although more likely prices will try to find some stability after the recent losses and may hold in the current pattern seen Friday morning as increased volume steps back into the market. Cash cattle markets are heading into Friday morning with very little market direction or development. This is not totally unexpected given the short holiday week, and lackluster direction in futures trade over the last couple of days. But packer interest is expected to improve significantly over the next few hours with bids likely to be seen steady to firm from levels Thursday. Asking prices remain at $126 to $127 live basis and $200 and higher dressed. Open interest Thursday added 2,543 positions (343,724). Spot February lost 3,098 positions (113,056) and April contracts gained 3,752 positions (101,886). DTN projected slaughter for Thursday is 117,000 head.

FEEDER CATTLE:

Open: $1 to $2 Lower. Strong pressure is seen in feeder cattle trade early Friday morning with the overall lack of buyer support over the last couple of days leaving prices under pressure. The turn lower Thursday which left prices firmly under pressure has created follow through weakness not only in feeder cattle trade, but the entire cattle complex. This could bring about late week liquidation as traders try to adjust to recent market support even though the underlying tone of the market still is focusing on firming demand through early January. After markets posted gains of nearly $8 per cwt in the last several sessions, the complex is ripe for a correction. Cash lean index for 1/3 is listed at $155.600, down 0.30. Open interest Thursday added 257 positions (51,988).

LEAN HOGS:

Open: Steady to 30 cents lower. Light pressure is seen through the entire lean hog futures complex early Friday morning. The strong push lower in cattle trade as traders returned to the market is having spill over pressure in the hog market. Although nearby contracts have been able to hold narrow losses of 5 to 10 cents per cwt in the opening minutes of trade, the lack of support is sparking increased pressure in deferred contracts. This may add even more weakness to the entire livestock market through the end of the week. Cash bids are steady to $1.50 per cwt higher. Most bids are 50 cents to $1 higher. Open interest Thursday added 4,060 positions (248,241). Spot month February fell 1,688 positions (79,737) and April added 3,607 positions (76,022). Cash lean index for 1/03 is $63.63, up 0.88. DTN projected slaughter for Friday is likely to be limited to near 445,000 head due to weather conditions. Saturday runs are projected at 385,000 head.

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

(SK)

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