DTN Before The Bell-Livestock

Sluggish Trade Develops Friday

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

Mixed trade is seen in all livestock markets with limited activity Friday morning leaving traders looking for additional direction through the last half of the session. Narrow trading ranges are seen in cattle and hog futures with prices stuck in a tight trading range on either side of unchanged. Corn markets are higher in light early trade. Stock markets are higher. Dow Jones is 97 points higher with Nasdaq up 27 points.

LIVE CATTLE:

Open: Mixed. Live cattle trade is stuck in a very narrow trading range early Friday morning. Most contracts are steady to lower, but the range of the market has been contained to 20 cents lower to 10 cents higher, leaving a generally steady market tone through early morning trade. There is increased focus on late week reports and what may develop in the cattle on feed report and cold storage numbers. This will likely add more volatility early next week, than Friday's trade, but traders remain cautious as they try to position current holdings following early week gains. Cash cattle activity is sluggish early Friday morning although bids have redeveloped in the same range as seen over the last couple of days at $123 live and $198 dressed. Asking prices remain at $128 and higher live and $205 to $207 dressed. Late day trade is a strong possibility. Open interest Thursday added 2,311 positions (397,175). Spot month February contracts lost 1,310 positions (4,238) and April contracts added 36 positions (160,457). DTN projected slaughter for Friday is 114,000 head.

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FEEDER CATTLE:

Open: 20 to 40 cents higher. Narrow to moderate gains are slowly redeveloping at the end of the week. Traders are trying to adjust to the upcoming cattle on feed report, although at this point, there is very little certainty on how much weight will be put on a month-old report. Just because the information is now available, doesn't make it meaningful for the market as many traders have already factored in expected adjustments well before the report based on overall general market observations and industry activity. This will be the challenge over the next couple of weeks as traders rebalance the focus between reports getting caught up and market direction. Cash index for 2/20 is $141.11 up $0.01. Open interest Thursday fell 356 positions (50,422).

LEAN HOGS:

Open: Mixed. Limited activity is seen early Friday morning with traders allowing prices to hover in a narrowly mixed range. Traders seem to be unimpressed by the market rally developing Thursday, as a combination of limited follow through buying and position taking is developing early in the session. The focus on outside markets and backlogged reports will serve as additional fodder for traders to assess through the day. The hope that news on a China deal develops sooner than later is helping to bring additional support back to the complex, although at this point, traders seem to be much less aggressive than Thursday's trade and market shift higher. Cash hog trade is steady to $2.00 lower. Most bids are expected 50 cents to $1 lower. Open interest gained 432 positions (241,983). April fell 496 positions (103,193) and June lost 712 positions (43,391). Cash lean index for 2/20 is $54.06 down $0.07. DTN projected slaughter for Friday is 470,000 head. Saturday runs are projected at 149,000 head.

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

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Rick Kment