DTN Early Word Opening Livestock

 
Cattle: Steady    Futures: Lower Live Equiv: $149.04 +0.48* 
Hogs: Steady to 50 cents LR Futures: Lower Lean Equiv: $ 67.47 +0.47** 
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cash business is doing what it usually does, and that is wait until late in the week before deals are inked. Bids and offers remain mostly $2 apart. The drop in futures since the end of last week could make sellers a bit more willing to take care of business, leaving cash prices mostly steady to a little lower. The inability of the market to rebound so far this week may keep pressure on prices. Supply of cattle is expected to be higher in the second quarter of the year, which may make it difficult to push to new highs.

Lean hog futures have taken a beating in the past months, but after the spike bottom on Feb. 20 futures have been generally sideways. Further futures weakness may develop early in the trading session, but price support should be found under this market. The U.S. is stepping up to prevent African swine fever from entering the country. Cutout values were higher Wednesday, but higher prices did not underpin the market. Cash hogs are expected steady to 50 cents lower.

	BULL SIDE		BEAR SIDE
1)	Traders may step back into the market, taking advantage of the dip in price to positions themselves for the Cattle on Feed report.	1)	The recent decline of cattle futures could make buyers less aggressive, paying no more than steady prices with last week.
2)	The discount of June to April futures should keep traders interested in holding and increasing long positions as demand should pick up through the second quarter.	2)	The Cattle on Feed report could show plentiful supply through the second quarter, keeping buyers confident supply will be readily available.
3)	The potential for a resolution of the tariff war could be a catalyst to propel futures higher as pork exports to China would increase.	3)	January pork production increased 4% from the previous year with weights up 1% according the National Agricultural Statistics Service report. The number of hogs slaughtered were 3% higher.
4)	The USDA stepping up to prevent the spread of swine fever to the country makes U.S. the main country to go to for pork supply, thereby increasing demand substantially.	4)	The January Cold Storage report on Thursday afternoon could show a substantial inventory of pork due to slower exports and strong slaughter activity.

Robin Schmahl can be reached at rschmahl@agdairy.com

(BAS)

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