DTN Early Word Opening Livestock

 
Cattle: Steady to $1 Lower Futures: Mixed Live Equiv: $150.26 -0.32* 
Hogs: Steady to $1 Higher Futures: Higher Lean Equiv: $ 72.34 +0.95** 
  
* 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 trade was basically non-existent Thursday. Feedlots were struggling to take care of animals either due to flooding or blinding snow storms. Trade should commence Friday as business needs to be done. However, the stage was set earlier this week with light trade a $1 lower than last week at $127 live and $204 dressed. Deferred live cattle futures made a valiant attempt at regaining losses, but could not get back up to the contract highs. Feeder cattle were nowhere near a recovery with futures posting a lower high for the fourth consecutive day on the charts. Bullish traders will need to regain control or futures will trend lower. Lower cash may temper buying interest, keeping futures on the defensive.

Hogs have left the proverbial pen and are headed for higher ground. April hogs have rallied $8 since last week, moving the market to overbought territory. However, the news that China purchased 23,800 metric tons of pork last week may keep this market moving higher. This is the largest purchase made by China in almost two years, despite tariffs still in place. Estimates are that between 20% and 30% on China's herd has been culled due to African swine fever. Traders have been pent up waiting for news such as this. This could take hogs prices significantly higher if last week's purchase is followed with more. Carcass values were higher with cutouts posting solid gains.

	BULL SIDE		BEAR SIDE
1)	Packers may become more aggressive Friday as they need to ink some business. Winter storms and flooding this week moved selling interest to the back burner Thursday.	1)	Feedlot managers may be willing to move cattle at lower prices in order to lighten up inventory until winter is over and feedlots dry out.
2)	Higher futures Thursday and potential spillover support from hogs could move futures to revisit the highs of last week.	2)	Feeder cattle futures making a lower high four days in a row does not bode well technically. Contracts have been unable to rebound technically as live cattle have.
3)	China purchased a substantial amount of pork despite tariffs. They need the product due to the significant reduction of their herd. More purchases are expected, pushing prices higher.	3)	Now that pork purchases by China have finally taken place, it may be a "buy the rumor, sell the fact" mentality corresponding with possible end of the week profit-taking.
4)	Pork cutouts continue to do very well. Good demand is keeping packer interest strong with higher cash expected now that rumors have become fact.	4)	Hog futures are overbought after increasing around $8 since last week. It may have increased too far, too fast with a price correction necessary to balance positions.

Robin Schmahl can be reached at rschmahl@agdairy.com

(BAS)

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