DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv $150.79 -0.02* 
Hogs: $2 Higher Futures: Mixed Lean Equiv $ 82.29 +1.58** 
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Early cattle trade is expected to be mixed to moderately lower with traders having the weekend to assess Friday's Cattle on Feed report. Feeder cattle trade is expected to be the most focused on the market following total placements through the month of February at 102%. This is a 6% jump from pre-report estimates and is expected to be viewed generally bearish through the overall complex. Cattle on feed numbers came in at 101% year-ago levels, still 1% over estimates. This is not expected to create a significant long-term shift in overall supply levels but could quickly cool the buyer support recently in feeder cattle trade the last couple of weeks. Cash cattle trade is expected to remain unchanged with limited interest Monday following the firming cash cattle price late last week. Showlist distribution and inventory taking is expected to be the main focus through the cash markets early in the week.

Early mixed trade is expected Monday following a volatile shift late last week that quickly broke markets out of the emotionally charged limit gains the past few days. With lean hog futures still trading at contract highs, the focus on continued strong fundamental and technical support remains well rooted through the entire complex. But the fact that this most recent market rally has been so emotionally driven, the potential for a strong market retraction still exists. Given the unchecked market rally through the month of March, there continues to be growing nervousness about the ability to sustain this type of market momentum, or price support through the rest of the spring. Cash hog values are expected to redevelop steady to $2 per cwt higher with most bids $1 per cwt higher Monday morning. Expected slaughter Monday is at 477,000 head.

	BULL SIDE		BEAR SIDE
1)	Strong cash cattle trade Friday developed with prices $1 to $4 per cwt higher than the previous week. This is helping to solidify additional buyer support through the entire complex.	1)	Feeder cattle placements in the month of February surged higher, with 102% year-ago levels placed in yards. This is well above estimates but also exceeded the expected range.
2)	Continued long-term beef market support is expected, helping to focus traders attention on upcoming summer demand and the ability to meet these demands with generally stable cattle supplies.	2)	Lack of active gains last week in wholesale beef values has created some additional questions if follow-through support will continue through the end of the month. This could lead to a moderate pullback in live cattle and feeder cattle trade.
3)	Continued strong gains in pork cutout values through the end of last week has helped to solidify demand needs as pork prices have continued to escalate higher based on growing domestic and export demand.	3)	Lean hog futures quickly broke away from limit gains Friday, creating increased uncertainty about short-term direction in the emotionally led market rally. This could open the door for aggressive selling in the next couple of trading sessions.
4)	Active cash buying continues to develop through the month of March with cash market moves of $1 to $2 per cwt expected to return early in the week. The need to secure needed end-of-month procurement numbers is expected to add increased underlying support to the entire complex.	4)	Limited new information surrounding any details of a trade agreement with China is causing uncertainty as talks are expected to take place this week in China.

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

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