DTN Before The Bell Livestock

GENERAL COMMENTS:

With global stock markets pursuing fresh all-time highs, ag commodities are also seeing active trade Monday morning. Live cattle and lean hogs have been attracting buyers willing to explore fresh contract highs. Feeder cattle traders, meanwhile, are taking a more cautious approach. Corn is 7 cents higher in moderately active trade. Stock markets are higher Monday morning, with the Dow Jones up 171.65 points and the NASDAQ up 58.45 points.

LIVE CATTLE:

Open: Mixed. In active trade, the nearby February contract is down $0.475 at $116.25, but several deferred contracts are holding small gains. The April contract was able to trade as high as $124.25 Friday, which was not quite a contract high, and finding more buyers to stick their necks out Monday could depend on outside factors. Global stock markets are setting fresh all-time highs at the start of this week, and although there isn't such a direct relationship between beef and stock prices as there once was, it still means investors will have extra capital to flow into various asset classes. Meanwhile, cash cattle traders won't be doing much Monday beyond gathering facts and planning ahead, but they'll be carrying the momentum from the past two weeks of higher price movement. Last Friday, Southern live business transacted at mostly $114 and Northern dressed business transacted at mostly $178 to $180. However, from the demand side, a seasonal top is expected somewhere for boxed beef prices (lately $234.58 choice and $220.79 select), and the rest of the market may need to hit pause on its recent recovery. DTN projected slaughter for Monday is 114,000 head. On Friday, total open interest lost 3,207 positions (323,893). The February contract lost 6,062 positions (19,525) and the April contract added 1,724 positions (144,225).

FEEDER CATTLE:

Open: 20 to 50 cents lower. The nearby March contract is down $0.20 at $138.075 and the April contract is down $0.40 at $141.80. Lately, the nearby charts seem to be stuck in a sideways pattern, perhaps waiting to see if the feed grains markets will break out of their own chart consolidation. There is a WASDE report due out Tuesday morning, which could contribute some volatility in corn futures prices this week, which in turn could spark some volatility in feeder cattle futures one way or another. The CME Feeder Cattle Index for 2/4 was down $0.62 to $135.65. On Friday, total open interest added 111 positions (39,865). The March contract lost 969 positions (17,157) and the April contract added 1,029 positions (7,463).

LEAN HOGS:

Open: Higher. Nearby lean hog futures are building on their gains from last week and establishing fresh contract highs first thing Monday morning. For reference, the new contract high for the actively traded April contract is $80.80 and the July chart has now successfully pierced the $90 level, trading $0.30 higher Monday morning at $90.25. This market rally has avoided any major profit-taking sell-off so far and, as long as the signals remain favorable, could continue to explore these higher prices. In the day-to-day timeframe, those signals may come from outside markets like the U.S. dollar, which has traded both sides of unchanged Monday morning. In the longer term, of course, pork prices continue to rely on a bullish export outlook. On Friday, total open interest grew by 3,783 positions (236,548). The February contract liquidated 1,899 positions (11,298) and the April contract added 1,999 positions (101,053). Open interest in pork cutout futures added 150 positions (1,729). Cash lean index for 2/4 is 69.27, up 0.18. DTN projected slaughter for Monday is 491,000 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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