DTN Before The Bell Livestock

GENERAL COMMENTS:

Early-morning weakness is seen in hog futures as traders quickly and aggressively back away from earlier gains. The mixed market moves in cattle futures continues to show lack of direction as traders struggle with higher feed prices and production costs, but are unwilling to aggressively sell into this market which may be at or nearing long-term support levels. Corn is trading higher in light to moderate trade. Stock markets are higher in limited morning trade. Dow Jones is 16 points higher with NASDAQ up 20 points.

LIVE CATTLE:

Open: Mixed. Narrow trading ranges are seen early Wednesday in all live cattle futures. This underlying pressure in the complex continues to add increased uncertainty to the market following the surge in corn prices during the week. Limited interest is expected to be seen in most contracts, although the general tone of nearby pressure, while deferred buying interest slowly develops is likely to continue through most of the week. Cash cattle markets are starting to show interest with early bids developing in the South at $109 per cwt. Following pressure in nearby live cattle and feeder cattle Tuesday in reaction to higher corn prices, packers are quickly backing away from previous week's price levels. Asking prices are around $113 to $114 live and $176 and higher dressed, but the development of light trade Tuesday afternoon at $173 to $174 per cwt is $2 to $3 lower than last week, and could set the tone for additional midweek trade. Open interest rallied 4,969 positions (309,830). February contracts lost 8,351 positions (77,973) and April contracts added 8,128 positions (107,455). DTN projected slaughter for Wednesday is 119,000 head.

FEEDER CATTLE:

Open: Mixed. Following aggressive losses Tuesday, which neared $3 per cwt in nearby contracts, traders are trying to step back into the complex. Although continued pressure will be seen in the market with corn markets above $5 per cwt and gaining momentum Wednesday morning, the focus on long-term support levels at or above $133 per cwt have drawn renewed buyer strength to the market. This could help to firm market support over the near future despite the increased production costs. Cash index for 1/11 is $136.23, up 0.07. Open interest Tuesday added 254 positions (41,919).

LEAN HOGS:

Open: Steady to $1 lower. Active pressure is seen in nearby February and April futures with traders looking for increased market direction from outside markets and moves in pork cutout values. With ham cuts falling over $14 per cwt Tuesday, traders remain concerned that further pressure may start to develop in pork values through the rest of the week. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest gained 1,738 positions (204,740). February liquidated 7,558 positions (53,025) and April added 6,606 positions (67,511). Open interest in pork cutout futures added 94 positions (1,187). Cash lean index for 1/11 is 64.49, up 0.58. DTN projected slaughter for Wednesday is 493,000 head. Saturday runs are expected near 256,000 head.

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

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