DTN Before The Bell Livestock

GENERAL COMMENTS:

Active pressure in feeder cattle futures have developed early Monday morning, although the losses appear to be quickly contained with traders focusing more on last week's gains, than potentially supply changes seen in the latest report. This is leaving live cattle and lean hog futures mixed in a narrow range as traders once again look for additional direction from grain markets. Corn is trading higher in light to moderate trade. Stock markets are mixed in morning trade. Dow Jones is 102 points lower with NASDAQ up 178 points.

LIVE CATTLE:

Open: Mixed. Aggressive late-week gains Friday in all cattle markets has helped to limit pressure across the complex, with nearby contracts steady to moderately higher based on renewed technical support across the entire complex. Deferred futures are under light pressure based on the pullback in feeder cattle trade following higher than expected cattle placement levels. With recent contract strength seen in all live cattle futures, there is likely to be additional wide market adjustments, potentially leading to moderate price swings over the next couple of trading sessions. Cash cattle activity is remains quiet Monday morning. This is not unusual for a Monday, but with a major winter storm system moving through the upper Midwest, it is likely to further delay cash market activity. The recent support in futures and beef values continues to focus on underlying strength in cash values, although packers still remain well positioned and likely will further limit additional spending over the near term. Open interest rallied 3,139 positions (324,814). February contracts lost 3,286 positions (47,841) and April contracts added 2,700 positions (133,528). DTN projected slaughter for Monday is 118,000 head.

FEEDER CATTLE:

Open: $1 to $2 lower. Higher than expected cattle placement levels in Friday's cattle on feed report has quickly adjusted markets lower following last week's limit gains based on eroding corn prices. Although the cattle complex has access to expanded trading limits through the entire day, it appears that traders are showing no interest in moving price levels to these extreme levels based on relatively calm market shifts so far Monday morning. March futures have led the market lower with prices holding $1.50 to $2 per cwt losses during the morning activity with the focus on higher than expected December placements likely to limit further short-term support. The increased placement levels will affect fed cattle supplies in the last half of the year, but there still remains some questions of how feeder cattle placements will develop in early 2021. If traders can retain the majority of Friday's upward market movement through the session, there is expected to be some additional underlying buyer support developing across the complex over the next couple of weeks. Cash index for 1/21 is $133.99, up $0.80. Open interest Friday added 661 positions (40,711).

LEAN HOGS:

Open: Mixed. Following aggressive market shifts seen Friday in all livestock and grain trade, lean hog futures appear to be showing the most stability Monday morning of all livestock markets. Lean hog futures are mixed within a narrow trading range from 15 cents lower to 12 cents higher with most contracts unable to move out of the single digit trading range. Most of the attention still remains in cattle trade, although the underlying support in pork values and continued focus on further loss potential in grain markets seem to have buyers hovering on the sidelines. Limited trade volume is likely to be seen through most of the morning, although the focus on building additional technical support above $70 per cwt in February futures and moving summer contracts above $85 per cwt continues to stir bullish momentum through the entire complex. Cash hog bids are expected $1 lower to $1 per cwt higher, with most bids steady 50 cents higher. Open interest gained 3,423 positions (213,055). February liquidated 1,334 positions (27,663) and April added 2,026 positions (89,006). Open interest in pork cutout futures added 47 positions (1,202). Cash lean index for 1/21 is 65.55, up 0.15. DTN projected slaughter for Monday is 489,000 head.

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

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