DTN Before The Bell-Livestock

GENERAL COMMENTS

Livestock futures have posted weak market shifts early Friday with lean hog futures eroding slowly lower, while moderate to firm gains have developed in cattle trade. Traders are expected to focus much of their attention on the USDA reports coming out later in the morning, although these will show more direction to grain trade than direct livestock markets. Corn markets are higher in light early trade. Stock markets are lower. Dow Jones is 190 points lower with Nasdaq down 52 points.

LIVE CATTLE:

Open: Steady to 40 cents higher. Firm end-of-week buying is moving into live cattle trade. The support has been contained to nearby contracts with very little volume stepping up to the plate through the first few minutes of trade. This could allow for additional market shifts as the day continues. Most of the focus Friday is expected to be on the increased amount of data in the USDA reports, which will cover essentially the last two months of supply and demand information as well as production data. Sorting through all of the delayed and current information will make it more challenging to sift through what is relevant and meaningless at this point. Cash cattle bids have improved in activity through the morning, although price levels are consistent with levels seen earlier in the week. Live bids are holding at $121 per cwt and dressed bids are undeveloped at this point. Asking prices remain at $126 to $127 live, and $203 and higher dressed basis. It is likely to be late in the day before trade develops. Open interest Thursday added 67 positions (387,165). Spot month February contracts slipped 1,392 positions (19,543) and April contracts fell 1,010 positions (166,940). DTN projected slaughter for Friday is 116,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents higher. Limited buying is seen early Friday morning with traders focusing on increased underlying support as they look toward the USDA crop production report and updated information about grain supplies. This could significantly affect overall feeder cattle prices as traders are looking for a lower corn and soybean prices going into and following the report. A surprise in grain markets could add increased end of the week volatility to the feeder cattle complex. Cash index for 2/6 is listed at $141.81 up $0.28. Open interest Thursday fell 466 positions (48,177).

LEAN HOGS:

Open: Mixed. Lean hog futures have continued to erode lower following underlying pressure in most contracts. The inability for demand to get caught up with hog and pork supplies continues to erode nearby support late in the week. In an unusual shift in open interest activity Thursday, the most active growth in open interest developed in the last quarter of 2019. This indicates additional trader interest in long-term buying as some traders are trying to avoid what could be increased volatility based on demand uncertainty and growing hog supplies through the spring and summer months. Lightly traded front-month February futures are holding 10 cent gains, while the rest of the complex is slightly lower. The potential for end of the week short covering to develop before markets close is strong, allowing for potential market swings Friday. Cash hog trade is steady to $1 lower. Most bids are steady to 50 cents lower. Open interest added 2,763 positions (223,917). February lost 1,721 positions (12,823) and April added 432 positions (93,694). Cash lean index for 2/6 is $56.89 down $0.27. DTN projected slaughter for Friday is 440,000 head. Saturday runs are expected near 214,000 head.

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

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