DTN Before The Bell-Livestock

GENERAL COMMENTS

Aggressive gains have developed through the cattle complex early Wednesday with traders focusing on spillover support through the rest of the complex. There is uncertainty surrounding the ability of depth of buying activity through the end of the session. Corn futures are trading lower in light early trade. Stock markets are higher in light trade. Dow Jones is 89 points higher, while Nasdaq is up 66 points.

LIVE CATTLE:

Opening call: $1 to $2 higher. Sharp early-morning gains have quickly redeveloped through live cattle futures as traders are focusing on the aggressive moves seen in feeder cattle trade. This is drawing support into front month contracts primarily based on the expectation that additional commercial support may develop later in the week. But the question of market depth during the Wednesday session is looming over the market as the inability to hold prices higher over last couple hours of the trading session. Cash cattle activity remains quiet early Wednesday morning with bids undeveloped through the early part of the day. Packer interest may develop later in the day, although it may still be late in the week before active trade is seen. Asking remain around $138 to $140 in the South and $215 and higher in the North. Open interest Tuesday fell 1,431 positions (268,122). Spot February fell 2,179 positions (11,535) and April contracts lost 501 positions (122,032). DTN projected slaughter for Wednesday is 109,000 head.

FEEDER CATTLE:

Opening call: $1 to $3 higher. Early morning buyer support has once again flooded back into feeder cattle futures with March futures trading as much as $3.30 per cwt in the early minutes of trade Wednesday morning. The big question facing the cattle complex through the morning is if there is enough underlying strength and depth in this buyer support to hold prices higher midweek, as prices posted strong triple digit gains Tuesday, but were able to only pull out a mixed close by the end of the trading session. The inability to sustain early market support could severely challenge any underlying fundamental long term support through the cattle complex. Open interest Tuesday added 60 positions (38,606). Cash index for 2/8 is 159.76 down 0.39.

LEAN HOGS:

Opening call: Mixed. Firm support in nearby contracts is unable to spark buyer support through the entire complex, although it is enough to draw underlying support through most contracts early Wednesday morning. February futures are leading the early morning price surge, with 57 cent gains based on expected fundamental support and lighter processing schedules keeping supplies moderately tight over the near future. Cash bids are $1 lower to $1 higher with most bids steady to firm. Open interest Tuesday added 2,141 positions (193,570) Spot month February fell 878 positions (17,298) and April added 638 positions (80,615). Cash lean index for 2/8 is 64.89, up 0.27. DTN projected slaughter for Wednesday 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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