DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Higher Live Equiv: $141.27 +0.17* 
Hogs: Mixed Futures: Lower Lean Equiv: $ 74.22 -0.69**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Packer interest should start to become more evident through the day with bids expected to redevelop during the morning in the similar range as seen midweek in the north at $197 per cwt. So far, there has been little interest in the South, although bids are likely to start at $120 and higher. This still leaves a significant gap between asking prices and bids going into the last half of the week. Cash business may not be inked until sometime Friday, with another round of late-afternoon trade very likely. Futures trade is expected to remain mixed. Even though firm support continues to hold in nearby live cattle complex. The softness through the rest of the livestock market may start to erode previous support.

Cash hog prices are expected to remain generally stable Thursday morning as overall market pressure could create some caution through the end of the week. Cash bids are expected steady to $1 per cwt lower, with most bids steady. Hog slaughter is expected to be 477,000 head Thursday. Saturday runs are expected at 145,000 head, as weather factors through the weekend are already causing for packer adjustments. Futures trade is expected to shift lower once again in initial trade following the aggressive market pullback in nearby contracts midweek. The market weakness may open the door for short-covering during the first couple hours of trade, all depending on the volume of trade moving into the complex.

BULL SIDE	BEAR SIDE
1) Strong support continues to flood into nearby live cattle trade. The focus on sharp losses in lean hog trade Wednesday helped to bring additional buying into the cattle market as traders quickly avoided the hog complex.	1) Feeder cattle futures continue to erode as traders remain concerned with the potential to push feed and grain prices higher. This is adding to production costs, and may continue to limit overall feeder cattle prices through the coming months.
2) Firming support continues to develop in beef cutout values. This overall support is likely to continue through the end of the week, allowing for potential firm cash market moves.	2) Even though nearby live cattle contracts are setting contract highs, prices are still $2 to $3 per cwt below 2018 highs set last February. With seasonal support remaining strong, it is uncertain if price levels will be able to move above these market levels at $130 per cwt, thus setting potential market softness through the upcoming months.
3) Packer margins continue to remain strong in the pork complex. This is allowing for aggressive plant runs through January as trades try to take advantage of the market stability in cash trade while still putting an increased amount of pork into storage.	3) Sharp losses have flooded into lean hog futures trade with traders unable to hold recent market support. There is growing uncertainty through the entire complex, which is limiting additional support in all pork trade.
4) Despite the sharp triple-digit losses in nearby trade, the contract through the last half of 2019 firmed, allowing the overall outlook for market support to develop.	4) Pork values have eroded through the week with another firm market loss on Wednesday as the overall softness in futures trade is starting to limit general support in the entire wholesale meat complex.

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

(BAS)

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