DTN Before The Bell-Livestock

Cattle Futures Rebound on Short Covering

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Nick Scalise)
GENERAL COMMENTS

Firm gains have slowly developed through the cattle complex in reaction to the aggressive limit down losses Monday. The concern that additional widespread pressure may continue to step back into the cattle complex could create underlying technical pressure could create longer term market softness. Hog futures remain lightly traded in narrowly mixed trade Tuesday. Corn futures are trading lower in light early trade. Stock markets are mixed in light trade. Dow Jones is 12 points lower, while Nasdaq is up 20 points.

LIVE CATTLE:

Opening call: Mixed. Front-month February futures are holding moderate losses Tuesday morning following first notice day Monday, creating the expectation that traders will continue to start focusing on rolling positions out of February and into April positions more quickly over the next couple of weeks. The rest of the complex is holding light to moderate support, although the support is starting to fade as initial short-covering support is starting to fade as more volume steps into the market. Even though expanded limits are in place, it appears that as of now, these wide trading ranges may not be seen given the lackluster activity early in the session. Cash cattle markets remain quiet, although packers are short bought going into the week given the light trade seen late last week. Packers' interest may not be shown until midweek or later, although asking prices may start around $138 in the South and $215 and higher in the North. Open interest Monday added 1,138 positions (269,554). Spot February fell 2,416 positions (13,714) and April contracts gained 1,790 positions (122,533). DTN projected slaughter for Tuesday is 110,000 head.

FEEDER CATTLE:

Opening call: Steady to $1 higher. Short covering has developed in feeder cattle trade following the limit losses which quickly developed Monday. The lack of follow through pressure early in the session is creating a relief for the market at this point, although traders are not yet at the point of breathing easy as markets could quickly turn. It is uncertain just how much underlying support is developing Tuesday morning given the light volume and if this momentum will help to keep markets higher through the rest of the trading session. Open interest Monday added 296 positions (38,550). Cash index for 2/5 is 160.15 up 0.48.

LEAN HOGS:

Opening call: Mixed. Despite the wild shifts surrounding the hog market, traders in lean hog futures seem to continue to trudge along in a steady pattern that is impressive. Mixed trade is seen early in the session, although most contracts are holding narrow losses, the light gains in nearby contracts are keeping traders focused on market stability and potential fundamental support. Cash bids are expected to be steady Open interest Monday added 1,202 positions (191,788) Spot month February fell 1,045 positions (18,176) and April added 188 positions (79,991). Cash lean index for 2/5 is 64.62, up 0.32. DTN projected slaughter for Tuesday is 425,000 head.

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

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Rick Kment