DTN Before The Bell Livestock

GENERAL COMMENTS:

Livestock futures have started Tuesday morning mostly lower in anticipation of volatility in the feed grains sector, but there may be enough bullish momentum on the charts, and supportive fundamentals from meat prices, to prevent a serious pullback. Corn is trading 2 cents higher. Stock markets are lower Tuesday morning, with the Dow Jones down 87.54 points and the NASDAQ down 3.94 points.

LIVE CATTLE:

Open: Mixed. The nearby February contract is up $0.15 at $116.725 and the April contract is down $0.30 at $123.65. Lower trade in the morning could turn around later in the day after the WASDE report jitters pass. Headlines are circulating about a new "supercycle" in commodity prices led by inflation and a post-pandemic spending spree. It's hard to believe live cattle futures prices would rise on that speculation alone without bullish fundamentals to back it up, but for now both sources of influence seem to be in agreement. The April chart hit a fresh contract high of $124.775 on Monday, so buying interest above that level has no clear chart resistance to damper its ambition. Continuous front-month live cattle futures reached as high as $127.55 back in January 2020. DTN projected slaughter for Tuesday is 118,000 head. On Monday, total open interest added 605 positions (324,383). The February contract lost 3,399 positions (16,010) and the April contract added 1,843 positions (146,069).

FEEDER CATTLE:

Open: Lower in cautious trade. Feeder cattle futures traders will be braced Tuesday for a potential jump in corn prices after an 11 a.m. (Central) monthly WASDE report that could whittle down world feed grains ending stocks. The nearby March contract is up $0.20 at $137.65 and the April contract is down $0.05 at $141.425. The losses so far this week can be explained by traders' hesitancy to step in front of the volatility bus likely to arrive Tuesday, but after it has passed, potential spillover buying from the rest of the bullish livestock sector could become the dominant influence on feeder cattle futures prices. The CME Feeder Cattle Index for Feb. 5 was down $0.18 to $135.47. On Monday, total open interest added 177 positions (40,042). The March contract lost 849 positions (16,308) and the April contract added 820 positions (8,283).

LEAN HOGS:

Open: 50 cents to $1 lower. Lean hog futures traders are finally taking some profits Tuesday morning after the past five straight sessions of price gains. The nearby February contract is down $0.50 at $71.675 and the April contract is down $1.025 at $79.625. On a normal day, the outside markets would be supportive to the export-reliant pork market, with the U.S. Dollar Index dropping heavily. But Tuesday the ag commodity markets will remain antsy until after the fresh monthly World Agricultural Supply and Demand Estimates are known. On Monday, total open interest grew by 1,166 positions (237,704). The February contract liquidated 1,050 positions (10,238) and the April contract lost 732 positions (100,321). Open interest in pork cutout futures lost 18 positions (1,711). CME Lean Hog Index for Feb. 5 popped up $1.13 to $70.40. DTN projected slaughter for Tuesday is a hefty 496,000 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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