DTN Before The Bell Livestock

GENERAL COMMENTS:

Aggressive triple-digit losses in live cattle and feeder cattle futures continue to highlight the livestock complex as underlying weakness seen last week continues to be the focus of nearby and deferred trade. Hog futures remain the most stable of the livestock complex, but firm downward pressure continues to hold in all contract months. Corn is trading lower in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 133 points lower with NASDAQ down 107 points.

LIVE CATTLE:

Open: $1 to $2 lower. Active pressure is seen in live cattle futures trade Monday morning highlighted the losses in the livestock complex. Although at this point, feeder cattle losses remain active also, the aggressive pullback in February and April live cattle contracts is gaining the most attention. Given the wide trading ranges in the market a technical market shift has not yet developed, allowing prices to continue to wander within the wide sideways range seen over the last several weeks. This could add further market weakness to the complex Monday, as there seems to be very little fundamental or outside market support developing early in the week. Cash cattle activity remains quiet Monday morning with traders focusing on the steady to higher trade last week, but concerns of pressure in futures trade is leading to questions of further cash market gains during January. Asking prices and bids are unlikely to be seen until near midweek, but the potential to bring stability to futures trade could go a long way in keeping cash markets steady for the week. Open interest rallied 3,199 positions (301,895). February contracts lost 5,694 positions (95,800) and April contracts added 5,373 positions (91,461). DTN projected slaughter for Monday is 119,000 head.

FEEDER CATTLE:

Open: $1 to $1.50 lower. Fueled by pressure in most other commodity and financial markets as well as active late week losses, renewed market liquidation continues to be seen in feeder cattle futures Monday morning. Nearby contracts are leading the complex lower even though corn market gains are not driving the new round of selling across the complex. The focus on potential more cautious trade activity in the coming days and weeks is limiting widespread market volume and causing traders to take protection in the event of further losses during the near future. Cash index for 1/7 is $135.63, up 0.28. Open interest Friday fell 397 positions (41,922).

LEAN HOGS:

Open: Steady to 80 cents lower. Widespread market pressure Monday morning in nearly all markets seems to have more to do with eroding lean hog futures than anything connected with the hog and pork market. Underlying pressure in stock and financial prices as well as firm morning pressure in the grain trade has allowed most lean hog traders to take a precautionary view to the market. This could lead to moderate follow through pressure during the morning, although at this point, the limited volume and attention elsewhere in the market systems could keep most hog traders unwilling to make significant market corrections. This could lead to price stability through most of the session. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest fell 255 positions (201,268). February liquidated 6,292 positions (67,881) and April added 3,656 positions (56,323). Open interest in pork cutout futures added 12 positions (1,084). Cash lean index for 1/7 is $63.34, up 0.38. DTN projected slaughter for Monday is 495,000 head.

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

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