DTN Before The Bell-Livestock

GENERAL COMMENTS

Firm gains have quickly moved into hog futures with nearby contracts holding gains near 50 cents per cwt in most contract months. This support is helping to relieve much of the pressure seen over the last couple weeks, but is still not enough to establish a firming trend. Live cattle futures are mixed in a very narrow range as traders look for additional volume in order to sustain previous days support. Corn markets are higher in light early trade. Stock markets are higher. Dow Jones is 238 points higher with Nasdaq up 44 points.

LIVE CATTLE:

Open: Mixed. Narrow price ranges are seen Wednesday morning with prices 15 cents lower to 12 cents higher in the first few minutes of trade. This lack of market activity may keep live cattle markets subdued through most of the morning and potentially create some stability through the entire week. The focus on weather conditions and primarily the cold temperatures through most of the Midwest is adding questions of follow through support which pushed April contracts to new contract highs Tuesday. Traders are also scouring the news for stories of cattle losses due to the cold weather, which could impact overall supply availability over the next several months. Cash cattle markets are quiet with feedlot managers focusing their attention on maintaining pen health in the cold weather, especially in the northern areas of cattle country, with lesser of a priority at this moment on weekly sales. Asking prices are still being floated at $125 and higher live and $200 to $203 dressed, but bids may be delayed until Thursday in most areas. Open interest Tuesday increased 313 positions (388,295). Spot month February contracts slipped 3,080 positions (40,830) and April contracts added 2,460 positions (161,848). DTN projected slaughter for Wednesday is 113,000 head.

FEEDER CATTLE:

Open: Steady to 40 cents lower. Light pressure is slowly developing through feeder cattle trade with trader activity very limited through the first few minutes of activity Wednesday. Traders are likely to become more active as the day continues, but for now, the limited direction in live cattle trade is expected to keep feeder cattle sluggish. Cash index for 1/28 is listed at $143.09 down $0.40. Open interest Tuesday lost 419 positions (51,403).

LEAN HOGS:

Open: Steady to 50 cents higher. Firm gains have developed Wednesday morning as steady to moderate buyer support is moving back into the market following recent market losses in all contract months. Fundamentally, the pullback in plant production due to the cold weather is likely to have a short-term impact on futures activity with plant schedules essentially cut in half due to the limitations of moving hogs to packing plants because of the cold weather. There is expected to be some reductions seen Thursday also, but at this point, it is hard to pinpoint just how widespread the cold weather will be and what impact it will have through the rest of the week. April through August contracts have posted firm gains 45 to 50 cents in early trade, focusing on spillover buying moving back into the oversold complex. Cash hog trade is steady to $1 lower. Most bids remain steady. Open interest fell 191 positions (214,369). February lost 2,180 positions (22,961) and April added 486 positions (89,311). Cash lean index for 1/28 is $57.89 down $0.33. DTN projected slaughter for Wednesday is 230,000 head. Saturday runs are targeted at 310,000 head.

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

(BAS)

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