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DTN Midday Livestock Comments          02/07 11:38

   Cattle Contracts Pause and Look for Follow-Through Support

   Heading into Tuesday's afternoon, traders will continue to look for support 
in the market's fundamentals in order to validate stronger trade throughout the 
futures complex.

ShayLe Stewart
DTN Livestock Analyst


   The livestock complex is trading mixed as both the live cattle and feeder 
cattle markets settle into a weaker position heading into Tuesday's afternoon, 
while the nearby lean hog contracts are finding modest support as the noon hour 
approaches. It's unlikely that any cash cattle trade begins Tuesday afternoon, 
but it's not unlikely that packers could offer up some bids by Wednesday as 
they'd like to see trade develop earlier than later. March corn is down 3 cents 
per bushel and March soybean meal is down $6.80. The Dow Jones Industrial 
Average is down 94.25 points.


   The live cattle complex is trading lower as traders timidly approach 
Tuesday's market. The timid attitude doesn't come because fundamental support 
is in question, but rather because the contracts have been rallying 
aggressively, and in the case of the live cattle market, actually reaching new 
contract highs nearly daily. February live cattle are down $0.10 at $160.72, 
April live cattle are down $0.72 at $163.75 and June live cattle are down $0.67 
at $160.02. What's been interesting to watch as of late (beside the cash cattle 
market) has been boxed beef prices. Beef demand continues to remain extremely 
high, which is helping boxed beef prices trade higher when, historically, boxed 
beef prices are pressured throughout the month of February. This is a win-win 
situation for the cattle and beef markets as packers will see the benefit of 
slightly higher boxed beef prices, which could entice/allow them to be more 
aggressive in the cash market. No cash cattle trade has developed at this 
point, but it's highly likely that packers start showing the market some 
support come Wednesday as they're shorter bought than what they'd like to be. 
Asking prices in the South are noted at $161 to $162 and are still 
unestablished in the North.

   Boxed beef prices are higher: choice up $1.11 ($267.68) and select up $3.50 
($257.22) with a movement of 67 loads (39.85 loads of choice, 9.41 loads of 
select, 5.51 loads of trim and 12.31 loads of ground beef).


   After rallying aggressively throughout Monday's market, the feeder cattle 
contracts are trading lower as the market pauses, waiting to see how the 
market's fundamentals shake out this week. Demand throughout sale barns early 
this week has been exceptional and with the nearby corn contracts trading $0.02 
to $0.05 lower, the market stands an excellent chance at rallying again when 
traders find confidence in the market's fundamental behavior. March feeders are 
down $0.20 at $187.52, April feeders are down $0.15 at $191.60 and May feeders 
are down $0.27 at $195.25.


   After becoming subject to immense pressure throughout Monday's market, the 
nearby lean hog contracts are finally finding some technical support while the 
deferred contracts continue to trade modestly lower. It would help if pork 
cutout values could indeed trade higher again Tuesday as the cash market is 
seeing some mild support, but pork cutouts continue to be extremely volatile. 
April lean hogs are up $0.50 at $83.22, June lean hogs are down $0.30 at 
$100.25 and July lean hogs are down $0.45 at $102.07. The market could 
potentially find some more long-term support on Wednesday when the newest WASDE 
report is released.

   The projected lean hog index for Feb. 6 is up $0.22 at $73.51, and the 
actual index for Feb. 3 is up $0.24 at $73.29. Hog prices are higher on the 
Daily Direct Morning Hog Report, up $0.41 with a weighted average of $72.22 on 
2,854 head, ranging from $65.00 to $76.00 and a five-day rolling average of 
$72.22. Pork cutouts total 178.72 loads with 164.56 loads of pork cuts and 
14.16 loads of trim. Pork cutout values: down $0.15, $81.47.

   ShayLe Stewart can be reached shayle.stewart@dtn.com

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