DTN Before The Bell-Livestock

GENERAL COMMENTS

Firm follow-through pressure is slowly but steadily developing in lean hog trade. Nearby contracts are holding losses just over $1 per cwt as the April contract is focusing on continued contract lows and the inability for fundamental support to spark any significant interest in the complex. Cattle futures are mixed as initial position taking following early-week gains is being offset by the attempt for buyers to step back into the complex. This is keeping cattle trade very sluggish Wednesday morning. Corn markets are higher in light early trade. Stock markets are higher. Dow Jones is 17 points higher with Nasdaq up 14 points.

LIVE CATTLE:

Open: Mixed. Live cattle futures have slowly backed away from Tuesday's sharp rally with nearby contracts stuck in a narrow trading range from 5 cents lower to 5 cents higher. This overall lack of support in the complex. Is far from a sell-off seen in previous weeks after setting new highs, but traders appear to be generally disappointed that buyers have not continued to quickly step back into the complex. As more volume moves into the market, a longer-term direction will develop, but this may be late in the day given the overall lethargic state of trade Wednesday morning. Cash cattle markets are quiet with just a few asking prices starting to develop. This is starting to set the tone for cattle priced at $128 live and $205 and higher dressed. Bids are still unavailable through the morning with most packers still unwilling to deliver an initial offer at this point. The direction of beef values through the day as well as moves in future trade may bring more clarity by the end of the day. But most trade is likely to be pushed off until sometime Friday. Open interest Tuesday added 3,014 positions (392,414). Spot month February contracts lost 1,487 positions (6,830) and April contracts added positions (159,949). DTN projected slaughter for Wednesday is 115,000 head.

FEEDER CATTLE:

Open: Mixed. Narrow trading ranges have developed early Wednesday with nearby contracts holding 20 to 40 cent losses as traders focus on adjusting positions following the firm market tone early in the week. Limited trade is seen through the morning and likely to remain sluggish through most of the session. Traders are focusing primarily on outside markets, although there is some focus being placed on early estimates of the end of the week cattle on feed report. The fact that this report will be based on numbers as of January 1st, will likely cause limited overall market reaction to all cattle trade. Cash index for 2/18 is $141.28 down $0.32. Open interest Tuesday fell 653 positions (50,363).

LEAN HOGS:

Open: Mixed. Firm triple-digit losses have continued in nearby lean hog futures with April futures leading the market lower. Limited short covering is seen in deferred trade with narrow gains holding in these contract months in the initial minutes of trade. The contracts which are holding narrow gains, were also the markets that did not post limit losses Tuesday. The underlying tone of the market remains extremely weak, allowing for increased pressure to likely move back into the complex as traders continue to set new contract lows. Cash hog trade is steady to $1.00 lower. Bids are scattered through the range. Open interest fell 2,934 positions (242,680). April added 1,790 positions (100,905) and June fell 754 positions (43,162). Cash lean index for 2/18 is $54.43 down $0.31. DTN projected slaughter for Wednesday is 445,000 head. Saturday runs are projected at 154,000 head.

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

(BAS)

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