DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv $146.43 +0.17* 
Hogs: Steady to $1 Lower Futures: $1 Lower Lean Equiv $ 84.53 +0.75**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Follow-through pressure is expected to slowly develop early Tuesday morning with traders focusing on the inability to bring any stability back into nearby contracts Monday. This continues to have more impact on nearby live cattle contracts and the entire feeder cattle market with April live cattle futures within striking distance of breaking through short-term support levels. Moderate early losses would break through February lows, and create some underlying pressure through the entire complex. This may limit the potential for follow-through buying as liquidation continues across the complex. Cash cattle markets are expected to remain undeveloped across the complex with traders looking for increased overall activity through the rest of the week. Bids and asking prices are still likely to remain overall sluggish with limited direction seen through the complex until later in the week.

The continued pullback in lean hog futures has created additional market uncertainty through the end of the month. Nearby contracts have not pushed prices nearly $1.50 per cwt off of recent highs, which is opening the door for additional liquidation through the next several trading sessions. The potential for additional support to trickle into cash and pork cutout levels is helping to draw additional underlying support across the market, which may add even more support to the long-term direction of the market. Cash hog values are expected to still remain steady to weak with early bids likely to range steady to $1 per cwt lower once again as packers attempt to regain processing margins. Given the recent firmness of the market, most early bids and sales are likely to be seen steady to weak. Daily procurement levels are targeted at 465,000 head Tuesday.

	BULL SIDE		BEAR SIDE
1)	Strong underlying support quickly developed through the boxed beef market early in the week. This is creating additional underlying support, which is pushing choice boxed beef levels near $220 per cwt. The continued support in the beef values is focusing on the long-term demand expected to be building across the complex.	1)	Renewed pressure in both live cattle and feeder cattle futures has created underlying market weakness through the complex. Nearby live cattle futures quickly followed the shift lower in feeder cattle. This pressure is limiting any need or desire for traders to move back into the complex over the next couple of sessions.
2)	Firm buyer activity which redeveloped in deferred live cattle futures is helping to draw additional support through the complex. This may add even more support to the overall trade volume in the complex through the next couple of trading sessions.	2)	The increased placement levels of cattle through the month of January continue to limit overall market stability as traders are faced once again with the reality that aggressive beef levels will be available through the rest of the year. This is limiting both short-term and long-term price support.
3)	Cash hog prices bounced higher late Monday, creating the expectation that some additional market firmness may continue to trickle into fundamentals through the end of the week.	3)	Despite the bounce higher in overall pork cutout values Monday, the increased volatility in primal cuts and wide ranging price swings through the complex is creating some significant uncertainty about the ability to continue to move pork prices higher through the end of the month.
4)	Moderate gains were seen in pork cutout values early in the week. This is helping to draw additional support to the market as traders focus on the ability to move pork product during the spring months as the potential to increased overall movement domestically and in export markets will likely help to sustain recent gains.	4)	Lean hog futures continue shift lower through the week, limiting the potential for additional buyer support moving into the complex. Although prices are still far away from breaking through support levels, the potential to draw substantial buyer activity into the market is becoming limited at the end of the month.

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

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