DTN Early Word Opening Livestock

 
Cattle: Steady Futures: $1 Lower Live Equiv $134.87 -0.60* 
Hogs: Steady Futures: $1 Lower Lean Equiv $ 85.34 -0.11**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

The strong pressure midweek in futures trade has allowed for packer involvement to remain generally absent from the market going into Thursday morning. It is likely that a few token bids may start to develop through the morning, although at this point, active trade may not be seen until sometime Friday. Asking prices are expected to be remain firm at $114 and higher live and $180 and higher dressed, but the support in these asking prices may have a lot to do with early-morning futures activity. Firm follow-through pressure is expected to develop in initial trade early Thursday, although the limited volume could bring in a mix of short-covering, which could keep overall price movements choppy and generally undefined through most of the morning trade.

Cash hog trade is expected to be generally stable with bids likely to develop from $1 lower to 50 cents higher through the morning. The strong pullback in lean hog futures on Wednesday seems to be the main focus of all hog markets, and even though technically it brought no surprises, it seemed to erode much of the emotional support that has built through the complex over the last week. Prices are far from a strong market pullback, and the move is considered a mere correction at this point, but general uncertainty through the complex could keep some market-watchers nervous as they try to determine where prices will go the rest of the week. The end of the week closing prices will be a much more significant guide, as it takes out the overall day-to-day volatility.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures continue to trade within the top edge of the market range despite the midweek pressure. This has the potential to spark some additional end of the week commercial buyer support to move back into the complex.	1)	Pressure in beef cutout values is creating some underlying concern through the beginning of the fourth quarter. Although overall demand is expected to firm through the coming weeks, the inability to support prices may limit long-term market momentum.
2)	April live cattle futures continue to hold an aggressive $11 per cwt premium over the October, focusing on building spring beef demand and supply management through the next six months.	2)	Cash cattle markets remain lethargic at this point in the week with bids generally undeveloped. The significantly weaker futures trade is causing many packers to become cautious through early October that a market shift could be developing.
3)	Despite the strong triple-digit losses, additional momentum developed in October contracts as prices steadily firmed through the day.	3)	Limited support developing cash hog values through the week seems to focus on the ability for packers to adequately manage hog supplies, but the lack of cash market strength could add to softness in futures trade.
4)	Aggressive packer processing schedules will continue to clear market-ready hogs at an active pace, limiting the ability for the pipeline to get backed up through the next couple of months.	4)	The October to December lean hog spread has widened to $10 per cwt following the wide market adjustments Wednesday. This could add some additional liquidation in spot contracts through the next couple of days, and further weaken overall lean hog markets.

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

(BAS)

Copyright 2018 DTN/The Progressive Farmer. All rights reserved.