DTN Before The Bell-Livestock

Hog Buying Resumes in Timid Fashion

Rick Kment
By  Rick Kment , DTN Analyst
(DTN photo by Nick Scalise)
GENERAL COMMENTS

Moderate to strong buying moved into the lean hog trade Monday morning as traders try to regain a sense of support following the wild price swings seen Friday. Cattle futures are holding moderate to strong pressure as traders are just now adjusting market direction to Friday's cattle on feed report which posted firm gains in February placements. Corn markets are lower in light early trade. Stock markets are lower. Dow Jones is 76 points lower with Nasdaq down 39 points.

LIVE CATTLE:

Open: $1 to $2 lower. Firm pressure is quickly developing in live cattle trade following the bearish cattle on feed report seen Friday. Overall cattle in feedlots is 101% year-ago levels, which is not only above market estimates, but slightly above the expected range in pre-report estimates. The growing numbers in feed yards as well as growing placement levels through the spring is causing some concern that overall beef supplies will not be as tight as earlier expected. Beef in freezers at the end of February increased 4% from year-ago levels, but fell 6% from January. This continues to confirm the active movement of beef out of the system, but the question about whether current demand growth can keep up with the larger feedlot supply is weighing on market prices early Monday morning. Cash cattle activity will return to a standstill Monday morning with show list distribution and inventory taking the focus through the day. Given the firmness in cash trade last week, both sides will try to leverage market position through the end of March, likely leading to another Friday showdown. Open interest Friday added 1,597 positions (455,256). Spot-month April contracts lost 4,218 positions (60,937) and June contracts added 2,846 positions (204,711). DTN projected slaughter for Monday is 118,000 head.

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FEEDER CATTLE:

Open: Steady to $2 lower. Swift market pressure quickly moved into all cattle trade with the most aggressive pressure seen in April and May contracts. Traders are trying to adjust market positions following Friday's cattle on feed report which posted overall placements in February 6% above early estimates. With cattle placements at 102% year-ago levels, the focus is slightly moving away from the idea of tighter supplies through the summer and fall months. This is impacting both live cattle and feeder cattle trade with triple digit losses seen through the entire complex. Cash index for 3/21 is $141.02 up $1.90. Open interest Friday added 687 positions (53,473).

LEAN HOGS:

Open: Steady to $2 higher. Initial support is moving back into lean hog trade following the aggressive market shifts seen Friday. Even though prices closed within a moderate range Friday, the wide intraday market swings have created uncertainty, but allowed for traders to take profits at the end of the week. The underlying support surrounding expected short- and long-term pork demand growth is helping to spark some additional buyer support. But as more volume moves into the complex, initial buying may start to soften once again. Given the sharp rally over the last two weeks, traders appear to feel a more significant market correction is looming. Cash hog trade is $1 to $3 higher. Most bids are expected to be $1 to $2 per cwt higher through the day Monday. Open interest added 1,158 positions (278,634). April fell 2,940 positions (28,952) and June added 306 positions (81,866). Cash lean index for 3/21 is $62.41 up $1.66. DTN projected slaughter for Monday is 477,000 head.

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

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Rick Kment