DTN Before The Bell Livestock

GENERAL COMMENTS:

Bullish export sales emphasized the bullish underpinnings of the pork market, and thus, the support this week for lean hog futures. However, a stronger dollar Thursday may be putting pressure on most commodity markets with significant export outlooks. Corn is trading 2 cents higher. Stock markets are higher Thursday morning, with the Dow Jones up 223.56 points and the NASDAQ up 42.68 points.

LIVE CATTLE:

Open: Mixed. The nearby February contract is up $0.025 at $115.5. The April contract, down $0.025 Thursday morning, could be settling into a sideways channel between $121.25 and $123.90, underpinned by positive fundamentals but bumping against resistance to fresh contract highs. Cash cattle asking prices for Southern live trade have been holding out around $115, which is about $2 higher than last week, in the knowledge that packers are aiming to process large numbers, but actual transactions could hold out until Friday. DTN projected slaughter for Thursday is 113,000 head.

Beef export sales, as of Jan. 28, continue to run above year-ago levels. The weekly export sales report showed net sales of 29,800 metric tons of 2021 beef, headed to South Korea (10,000 mt), Japan (7,000 mt), China (7,000 mt) and others.

On Wednesday, total open interest in live cattle futures lost 1,972 positions (324,841). The February contract lost 2,576 positions (26,665) and the April contract lost 765 positions (140,243).

FEEDER CATTLE:

Open: 15 to 20 cents lower. The nearby March contract is down $0.15 at $138.375 and the April contract is down $0.175 at $141.65. Lighter feeder calves have been doing well at sale barns this week, fetching prices generally $1 or $3 higher than last week. Once amalgamated together, those prices brought the CME Feeder Cattle Index for Feb. 2 up $0.04 to $136.44. On Wednesday, total open interest added 114 positions (40,082). The March contract lost 393 positions (18,511) and the April contract added 133 positions (6,383).

LEAN HOGS:

Open: 10 cents lower to 50 cents higher. Nearby February lean hog futures opened higher with a gap Thursday morning, and the deferred July contract has traded as high as $89.375 so far. Trading conditions are fast and likely to change throughout the day. The daily slaughter numbers (496,000 on Wednesday, 493,000 projected on Thursday) may not be quite record-high levels of business, but when we consider that dressed weights have been running at record highs lately (220 pounds in early January), packers are churning out a lot of pork. Fortunately, they're finding buyers for it: the pork cutout values remain resilient, with the overall carcass staying above 80 cents per pound. The weekly export sales report highlighted some of those usual buyers (China, Mexico), but with the U.S. dollar getting stronger Thursday morning, some of that bullish confidence about global pork prices may wobble through the upcoming trading session. The Chinese renminbi has lately been strengthening to 6.45 to the dollar.

Export sales of pork had 46,300 metric tons of weekly net sales, of which 17,900 mt will be headed to China and 10,300 mt will be headed to Mexico. Shipments of pork to China during Jan. 22-28 were 38,300 metric tons.

On Wednesday, total open interest in lean hog futures grew by 2,642 positions (230,073). The February contract liquidated 1,692 positions (14,521) and the April contract added 831 positions (97,004). Open interest in pork cutout futures added 170 positions (1,492). The CME Lean Hog Index for Feb. 2 is $69.17, up $0.30. DTN projected slaughter for Thursday is 493,000 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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