DTN Before The Bell Livestock

GENERAL COMMENTS:

Lean hog futures are still attracting enough buying interest to set fresh contract highs Wednesday morning, but cattle futures are moderately lower. Feed grains are dramatically lower while farmers lock in past price gains; specifically, corn futures are trading down 12 cents. Stock markets are higher Wednesday morning, with the Dow Jones up 81.33 points and the NASDAQ up 42.96 points.

LIVE CATTLE:

Open: Lower. In fast trade, the nearby February contract is down $1.15 at $116.30 and the April contract is down $1.15 at $122.675. Profit-takers may be driving the action in agricultural futures Wednesday morning, including live cattle futures, which hit fresh contract highs during Tuesday's excitable trade. The trading range in that Tuesday session was more than $2 wide, but the February chart is giving it all back and then some with Wednesday morning's losses. Cash cattle trade is aiming for a late-week showdown between feedlots and packers, with last week's prices set as the starting line: mostly $114 in the South and mostly $178 to $180 in the North. DTN projected slaughter for Wednesday is 117,000 head. On Tuesday, total open interest added 3,629 positions (327,984). The February contract lost 1,630 positions (14,385) and the April contract added 1,218 positions (147,249).

FEEDER CATTLE:

Open: Lower. Tuesday was a big day of trading volume for nearby feeder cattle futures, and although that pace of business is unlikely to be matched again Wednesday, a further drop in corn prices may keep buyers interested. Feeder cattle prices were 25 to 50 cents lower on the open, putting the March contract at $138.40. Apparently corn got a bullish report from USDA this week with tighter ending stocks, but it wasn't bullish enough, and that market has been double-digits lower overnight. It's still near $5.40 per bushel. In the meantime, spare a thought for the folks calving heifers in February when subzero temperatures have blanketed the center of the continent for five straight days and are forecast to keep doing so for five more. Those calves destined for fall marketing against the October futures contract are looking at a futures price above $154 per cwt Wednesday morning. The CME Feeder Cattle Index for Feb. 8 was up $0.16 to $135.63. On Tuesday, total open interest added 755 positions (40,797). The March contract lost 1,106 positions (15,202) and the April contract added 1,320 positions (9,603).

LEAN HOGS:

Open: Up to $1 higher. The nearby February contract is up $0.65 at $73.25 and the April contract is up $1.00 at $81.375. The July contract has traded above $91 per cwt. Packers have been eager buyers, willing to pay higher prices for hogs this week, but there would be some natural limit to their bullishness and the futures rally may eventually pause in recognition of that. From the demand side, the Chinese renminbi resumed its stronger long-term trend overnight, now 6.435 to the dollar, which gives U.S. pork prices more room to rise on the export market. On Tuesday, total open interest grew by 2,058 positions (239,768). The February contract liquidated 1,230 positions (9,012) and the April contract added 312 positions (100,633). Open interest in pork cutout futures lost 7 positions (1,704). CME Lean Hog Index for Feb. 8 popped higher again by $0.67 to $71.07. DTN projected slaughter for Wednesday 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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