DTN Before The Bell Livestock

GENERAL COMMENTS:

The implications from a bullish Cattle Inventory report, released Friday afternoon, are giving cattle futures traders a reason not to follow the steep losses seen at the end of last week's trade. In the lean hog futures trade, there may even be enough buying interest to take another run at contract highs, but only if the pressure from outside markets doesn't take over during the session. Corn is trading a penny lower in quiet trade. Stock markets are higher Monday morning, with the Dow Jones up 113.28 points and the NASDAQ up 91.25 points.

LIVE CATTLE:

Open: 7 to 50 cents lower. The live cattle chart has changed its tune since the late-Friday sell-off, using fundamental prices as its new band leader instead of watching outside market shenanigans. The nearby February contract is down $0.10 at $114.95 and the April contract is down $0.425 at $121.425. More stable prices are backed up by last week's cash business: Southern live cattle prices were up $3 to $113 and Northern dressed cattle were up $5 to $178. Strong boxed beef prices and resilient packer margins take away some of the worry that cash prices might jump back in the other direction, so traders may feel confident to "buy-the-dip" in live cattle futures at Monday's price levels. On Friday, total open interest lost 1,642 positions (327,987). The February contract lost 3,857 positions (32,836) and the April contract added 978 positions (141,295). DTN projected slaughter for Monday is 116,000 head.

FEEDER CATTLE:

Open: 45 cents lower. In the absence of much volatility in the feed grains sector Monday morning, feeder cattle futures are likely to take their direction from live cattle and the general long-term herd outlook, now that the Jan. 1 Cattle Inventory report has lent a more bullish mood to the market. The number of beef cows in the U.S. came in at 31.15 million head, down 1% from a year ago, which means fewer mamas will be having calves in the next few months, bullish to feeder cattle supply. The calves that are born today or in the near future, destined for the October feeder cattle market, are seeing futures prices remain around $150 per cwt Monday morning. In nearby futures, the nearby March contract is down $0.50 at $137.225 and the April contract is down $0.40 at $140.35. The CME Feeder Cattle Index for Jan. 28 was up $0.68 at $136.02. On Friday, total open interest in futures contracts added 440 positions (40,083).

LEAN HOGS:

Open: Mixed. Futures trading volume has been relatively active at the start of Monday's trading session, suggesting that lean hog traders are ready to see this market go somewhere this week. The April contract has traded as high as $77.30 already Monday, and another $0.30 gain would take it to a test of last week's contract high at $77.60. One thing that might challenge the timing, however, is a stronger U.S. Dollar Index at the start of this week, and because so much of the pork market's strength relies on a bullish export outlook, pressure from a higher dollar could be enough to give traders pause. So far, the nearby February contract is up $0.40 at $70.20 and the April contract has wobbled back down $0.25 to $76.40. On Friday, total open interest grew by 1,158 positions (222,094). The February contract liquidated 2,153 positions and the April contract added 1,573 positions. Open interest in pork cutout futures lost 16 positions (1,211). Cash lean index for Jan. 28 is 67.41, up 0.12. DTN projected slaughter for Monday is 481,000 head.

Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at masteringthegrainmarkets@gmail.com or on Twitter @elainekub.

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