DTN Before The Bell-Livestock

Hog Futures Tumble Lower Tuesday Morning

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Nick Scalise)
GENERAL COMMENTS

Aggressive pressure has quickly flooded through lean hog trade, erasing any sense of optimism seen late last week. This move has pushed nearby contracts to contract lows, breaking through long-term support levels. Corn markets are lower in light early trade. Stock markets are mixed. Dow Jones is 17 points lower with Nasdaq up 2 points.

LIVE CATTLE:

Open: Steady to 50 cents higher. Initial moves in live cattle trade have been supportive Tuesday morning following the holiday break. Light gains of 40 cents trickled into nearby contracts, while deferred futures were steady to single digits higher based on uncertainty in outside markets. The pressure in feeder cattle trade is likely to add softness to the market with pressure growing from deferred months and moving through the rest of the complex. Cash cattle activity will remain sluggish through most of the morning with bids and asking prices not expected to be seen before the middle of the week. Given the trend the past couple weeks of cash cattle business holding off until late Friday, many are expecting the same this week. Open interest Friday fell 601 positions (389,848). Spot-month February contracts lost 1,317 positions (8,327) and April contracts fell 1,366 positions (158,620). DTN projected slaughter for Tuesday is 115,000 head.

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FEEDER CATTLE:

Open: Steady to 50 cents lower. Light pressure is slowly trickling into feeder cattle futures as traders confirm the shift lower last week. Most of the emphasis in livestock trade has moved to the bearish tone in lean hog futures, allowing for the narrow 20- to 40-cent losses in feeder cattle to gain very little attention at this point. Once additional volume moves into the complex, traders are expected to continue to focus on the available supply of feeder cattle while long-term beef demand is starting to become more uncertain. Cash index for 2/14 is $141.31 down $0.19. Open interest Friday added 653 positions (51,044).

LEAN HOGS:

Open: Mixed. Strong pressure quickly developed in nearby lean hog futures Tuesday morning as traders had an extra day to process the short- and long-term direction of the market. The initial response once traders stepped back into the complex was aggressive selling, which sparked increased liquidation and sent the April futures contract reeling as it have hit new contract lows. This move breaks through long-term support set in the contract in the summer of 2018, allowing for increased uncertainty through all markets. Limited trade is allowing narrow gains to hold in deferred futures, but the weaker tone is quickly sweeping through the complex. Cash hog trade is steady to $1.00 lower. Most bids are steady. Open interest gained 129 positions (245,674). April lost 462 positions (99,115), and June fell 218 positions (43,931). Cash lean index for 2/14 is $55.02, down $0.19. DTN projected slaughter for Tuesday is 477,000 head. Saturday runs are projected at 154,000 head.

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

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Rick Kment