DTN Before The Bell-Livestock

GENERAL COMMENTS

Strong market losses are seen through lean hog trade as traders continue to focus on increased overall pressure through the entire complex. There is growing uncertainty as to just how much additional direction will be seen through the entire complex. Cattle trade remains mixed in limited activity was the focus on longer-term supply growth is eroding nearby market support. Corn markets are higher in light early trade. Stock markets are higher. Dow Jones is 253 points higher with Nasdaq up 55 points.

LIVE CATTLE:

Open: Mixed. Limited activity is seen as traders are focusing on follow through selling activity and short covering potential following the triple-digit losses seen Tuesday in nearby contracts. Traders appear to be taking a broader more long-term focus at trade Wednesday morning with prices still well within the current trading range as there is little indication that prices will break out of this wide range any time soon. Unlike the pressure in feeder cattle markets, traders still continue to focus on firm short-term demand, which is helping to limit aggressive pressure in most contract months. Cash cattle activity remains silent at this point with limited direction expected through the day. Token bids and a few asking prices may venture into the market, but both sides seem focused on cash market activity stretched to the later end of the week, with a Friday afternoon trade seemingly likely. Open interest Tuesday liquidated 2,316 positions (389,493). Spot month February contracts slipped 4,657 positions (57,307) and April contracts added 418 positions (154,020). DTN projected slaughter for Wednesday is 117,000 head.

FEEDER CATTLE:

Open: Mixed. Following the aggressive market pullback Tuesday, traders have taken a much more subdued and stable approach to the market early Wednesday morning. There is growing focus on the ability and need to rebuild some market stability back into the cattle trade. With nearby cotntracts extracting any sense of premium out of the market over the last couple of weeks, January and March contracts are trading in the same price range with traders focusing on the potential for increased placements through the near future, putting more pressure on supplies long term. This could limit overall market movement through most of the morning with traders looking for outside market direction. Cash index for 1/21 is listed at $141.62 down $0.09. Open interest Tuesday fell 2 positions (51,648).

LEAN HOGS:

Open: 50 cents to $1.50 lower. Strong pressure has quickly swept through lean hog futures in the opening minutes of trade. This allows for additional liquidation to develop with April contracts breaking through January lows through morning trade. The inability to hold this support level through the week is sparking increased bearishness that has spread from summer and fall contracts, and is moving through nearby trade. The overall concern of pork demand through the last half of the year and uncertainty surrounding trade negotiations seems to be sparking increased market weakness in all hog futures. Cash hog trade is steady to $1 lower. Most bids are steady to 50 cents lower. Open interest added 681 positions (205,397). February fell 1,619 positions (29,108) and April added 2,023 positions (82,783). Cash lean index for 1/21 is $58.33 up 0.26. DTN projected slaughter for Wednesday is 469,000 head. Saturday runs are expected to be 212,000 head.

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

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