DTN Before The Bell-Livestock

GENERAL COMMENTS

Cattle futures are holding strong triple-digit losses as traders have quickly erased all midweek gains once markets opened Thursday morning. The pressure in outside markets has created additional market pressure, bringing additional uncertainty to the complex. Trade volume remains light, although given the strong market pressure it may be hard to draw buyers back into the complex willing to curb market pressure. Corn futures are trading lower in light early trade. Stock markets are lower in light trade. Dow Jones is 159 points lower, while Nasdaq is down 17 points.

LIVE CATTLE:

Opening call: $1 to $2 Lower. Gains that quickly developed during late-day trade Wednesday have been quickly erased in the early minutes of trade Thursday, although the lack of activity so far gives a lot of room for market movement yet through the trading session. There is expected to be some additional market activity once the normal market players step back into the market, but it will be interesting to see if these buyers will be willing to step into the market at this point once the aggressive pressure has already started to develop. The lack of additional fundamental market direction may allow prices to gyrate higher and lower through the week in a wild range with very little pattern, as traders quickly jump in and out of the market in order to quickly fill positions. The lack of commercial interest developing at this point is creating a vacuum, limiting market support through the nearby contacts. Cash cattle markets are starting to crack with light scattered trade developing late Wednesday in the South at $134 per cwt. This is generally $2 per cwt lower than last week. Live bids in Nebraska are seen at $128 early in the morning as futures have opened defensive on the futures trade. Asking remain around $138 in the South and $215 and higher in the North. Open interest Wednesday added 3,456 positions (271,578). Spot February fell 536 positions (10,999) and April contracts added 1,050 positions (123,081). DTN projected slaughter for Thursday is 109,000 head.

FEEDER CATTLE:

Opening call: $1 to $2 lower. Strong pressure is quickly flooding into the feeder cattle futures with traders looking for additional market direction. The support seen midweek is quickly being questioned as traders are focusing on the combination of outside market pressure and also willing to quickly take positions following sharp nearby gains across the complex. The yo-yo pattern seen through the market through the week is breeding additional market volatility which if moving away from fundamental market direction, and more on outside market speculation and economic uncertainty. Open interest Wednesday added 565 positions (39,173). Cash index for 2/9 is 159.49 down 0.27.

LEAN HOGS:

Opening call: Mixed. Following the strong pressure seen Wednesday, lean hog futures have opened in a narrow range as traders focused on light gains in front-month February contracts while the rest of the complex was contained to 10-to-20-cent losses during the first few minutes of trade. The lack of direction through the market continues to limit increased market activity, which could spark some increased uncertainty, but the sharp losses in the cattle market are keeping most traders in hog trade on the sidelines looking for additional direction, at least for the first few hours of trade. Cash bids are 50 cents lower to 50 cents higher with most bids steady to 50 cents higher. Open interest Wednesday fell 1,299 positions (192,260) Spot month February fell 1,388 positions (15,910) and April lost 1,946 positions (78,658). Cash lean index for 2/9 is 65.29, up 0.40. DTN projected slaughter for Thursday is 435,000 head, with Saturday slaughter expected to be at 200,000 head.

Rick Kment can be reached at rick.kment@dtn.com

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