DTN Before The Bell Livestock

Lean Hogs Struggle to Overcome Resistance

Elaine Kub
By  Elaine Kub , Contributing Analyst
(DTN photo by Nick Scalise)

GENERAL COMMENTS:

The packing industry continues to bring through large daily numbers of both hogs (495,000 projected Tuesday) and cattle (119,000 projected Tuesday), and find supportive prices for the pork and beef. That fundamental strength may keep some of the nearby futures contracts from falling too far on a day when, otherwise, the attitude in the commodity sector seems bearish. Corn is trading 5 1/2 cents lower in active trade. Stock markets are higher Tuesday morning, with the Dow Jones up 411.77 points and the NASDAQ up 142.68 points.

LIVE CATTLE:

Open: 40 to 50 cents higher. The nearby February contract is up $0.475 at $115.35 and the April contract is up $0.525 at $122.225. Having pulled back almost $3 from last week's high of $117.625, the February live cattle futures chart may no longer have much cushion below its current price level before it's in danger of losing its premium to the cash market. Beef prices are still the fundamentally bullish factor that underpins live cattle's strength. Boxed beef numbers popped once again Monday, with the afternoon results showing choice up $1.73 at $235.68 and select up $2.89 at $225.59. In futures on Monday, total open interest lost 1,314 positions (326,679). The February contract lost 2,199 positions (30,644) and the April contract lost 652 positions (140,642). DTN projected slaughter for Tuesday is 119,000 head.

FEEDER CATTLE:

Open: $1 higher. Feeder cattle futures may have been taking some day-to-day direction from the ups and downs of feed grain prices lately, but the lower prices in grains Tuesday morning are not necessarily bullish news for feeder cattle. Instead, they may be part of a broader commodity sell-off while the U.S. dollar strengthens. There was a volume of new long positions established last week in feeder cattle futures that will be vulnerable to stop-loss orders and liquidation if the April contract continues to flirt with a sub-$140 chart position. So far Tuesday, the nearby March contract is up $1.10 at $139.025 and the April contract is up $1.075 at $142.15. The CME Feeder Cattle Index for Jan. 29 was up $0.41 at $136.43. On Monday, total open interest lost 406 positions (39,679).

LEAN HOGS:

Open: 25 cents higher. The nearby February contract is up $0.25 at $69.80 and the April contract is up $0.25 at $75.75. Last week's high of $77.60 on the April lean hog chart is weighing heavily on this market. Failing to get enough buying furor Monday to make a serious run at testing that resistance level, traders instead gave up on it and sent the market in a downward surrender. The chart may stabilize Tuesday and correct some of Monday's $1.15 losses, but another storm on the castle seems unlikely on a day when the rest of the commodity sector is retreating. On Monday, total open interest liquidated 811 positions (221,283). The February contract liquidated 1,490 positions (17,276) and the April contract lost 1,099 positions (93,625). Open interest in pork cutout futures added 80 positions (1,291). The CME Lean Hog Index for Jan. 29 is $68.27, up $0.86. DTN projected slaughter for Tuesday is 495,000 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.

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]
P[R1] D[300x250] M[300x250] OOP[F] ADUNIT[] T[]
P[R2] D[300x250] M[320x50] OOP[F] ADUNIT[] T[]
DIM[1x3] LBL[] SEL[] IDX[] TMPL[standalone] T[]
P[R3] D[300x250] M[0x0] OOP[F] ADUNIT[] T[]

Elaine Kub