DTN Before The Bell Livestock

Cattle Prices Shift Higher Early Friday

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

GENERAL COMMENTS:

Feeder cattle futures are quickly leading the market higher with triple-digit gains in nearby contracts. This is adding increased support through the complex as live cattle futures are shifting higher as buyers are quickly moving back into the complex. Markets will remain closed Monday due to Observance of Martin Luther King Jr. Day, leaving a long holiday weekend for traders to contemplate further market direction. Corn is trading mixed in light to moderate trade. Stock markets are lower in limited morning trade. Dow Jones is 97 points lower with NASDAQ down 16 points.

LIVE CATTLE:

Open: Mixed. Initial price shifts left prices mixed Friday morning, but the ability to spark underlying support and firming moves in feeder cattle trade led to increased buyer support in all live cattle trade. Although deferred summer contracts are only able to hold single-digit gains based on very little fundamental long-term changes in the market, late spring buying is helping to solidify trade support. April futures continue to lead the market higher Friday morning as traders look for potential supply tightness and continued active beef demand for most of the spring. The higher feed prices are expected to lighten cattle weights and keep the market much more current over the next three to six months, but spot markets are still struggling with increasing supply levels. Cash cattle markets remain quiet early Friday morning following light to moderate trade over the last three days. Bids remain unavailable through the morning as both sides appear to have most of the needed cattle traded for the week. The weakness in price levels is leaving many feeders willing to hold onto unsold cattle on showlists, hoping for better results next week. A few clean-up trades may be seen before the weekend, but for the most part, cash business is likely to be done. Open interest added 9,612 positions (320,872). February contracts lost 4,443 positions (65,020) and April contracts added 10,974 positions (126,707). DTN projected slaughter for Friday is 115,000 head.

FEEDER CATTLE:

Open: Steady to $1 higher. Following strong market retractions during the week, traders are steadily moving back into what many feel to be an oversold market structure. This has pushed most contracts $1 per cwt higher during early trade as traders continue to see short-term buy opportunities at the end of the week. With markets remaining closed Monday, it is expected that additional end-of-week interest will develop over the next few hours, although overall trade volume may still remain generally light Friday. Cash index for 1/12 is $136.05, down 0.18. Open interest Thursday added 109 positions (41,632).

LEAN HOGS:

Open: Mixed. Despite light buyer support trickling into the heavily pressured spot February contracts, follow through market pressure continues to develop across the lean hog complex. Trade is expected to remain generally limited Friday as traders prepare for a long holiday weekend with markets remaining closed Monday in observance of Martin Luther King Jr. Day. This will likely limit active price movement or significant position adjustments ahead of the weekend. Despite the pullback in price levels, increased open interest has quickly moved into the lean hog complex over the last few days as traders trying to reposition ownership state in the complex as this most recent market correction could spark longer term buyer support to continue over the near future. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents lower. Open interest gained 3,477 positions (210,139). February liquidated 5,922 positions (39,712) and April added 6,790 positions (80,623). Open interest in pork cutout futures fell 33 positions (1,114). Cash lean index for 1/13 is 65.87, up 0.39. DTN projected slaughter for Friday is 424,000 head. Saturday runs are expected near 287,000 head. Monday's Holiday runs are expected near 425,000 head, but subject to change.

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

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Rick Kment