DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv $140.15 +0.27* 
Hogs: Steady to $1 Lower Futures: Mixed Lean Equiv $ 82.66 +0.02**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle futures are expected to be mixed to mostly higher following the moderate-to-firm gains seen in the complex Wednesday. Even though futures remain in a short-term sideways pattern, thanks to the most recent buyer support, early-month short-term resistance could be tested. A combination of position-taking and follow-through buying is likely to keep traders in a choppy pattern during most of the morning. Cash cattle trade remains undeveloped going into the morning Thursday, although both sides are expected to become more active. A $6 per cwt gap continues between asking prices and early-week bids, which will likely narrow over the next couple of days. It likely could be late Friday before trade develops.

The strong rally higher midweek is likely to draw additional buyer support back into the complex Thursday. But the daily back and forth market shifts seen through the entire week continues to cause some concern that additional weakness may quickly develop over the near future. This may add even more volatility to the complex through the rest of the month. The ability to draw additional buyer activity to the market will not only help to move prices away from recent support levels, but should stimulate follow-through interest in all contracts. Processor schedules are expected at 465,000 head Thursday. Saturday runs are expected at 86,000 head.

	BULL SIDE		BEAR SIDE
1)	Recent buyer support has once again moved most all but the spot month March contracts back above $150 per cwt. This move is causing moderate-to-firm support in all markets as prices have rallied over $2 per cwt above recent market lows, which were set late last week.	1)	The inability to spark early cash cattle trade even at steady money continues to point to market uncertainty and the inability for packers to become more aggressive through the week. This is focusing on the recent market pressure in the entire complex.
2)	Packers remain short-bought given the generally light buying that was accomplished last week and continued aggressive processing schedules. As a result, no early trade has developed through the week, but higher cash prices could cause feeders to part with cattle at this point.	2)	Overall lack of consistent support in boxed beef values is adding increased weakness to the market. This may add some futures pressure at the end of the week.
3)	The strong market rally Wednesday has helped to push nearby prices nearly $2 per cwt above the long-term support levels, which has been developed last week. This renewed support could continue to draw buyers back into the market, which either had started liquidating positions, or had just remained absent over the last couple of weeks due to the recent market pressure.	3)	Lean hog futures continue to erode through the week, adding some concern that the inability to follow futures higher could quickly limit any recent support in the market.
4)	Stability in pork values has continued to draw some additional interest to the market. This could help to sustain additional market wide support across the entire complex.	4)	Despite the recent bounce higher in futures prices, the market remains week given the major market pressure over the last couple of weeks. This could limit overall market confidence over the coming days and weeks.

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

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