DTN Before The Bell-Livestock

GENERAL COMMENTS

Firm underlying pressure is quickly moving into lean hog trade. Concerns surrounding lack of additional pork sold to China in the weekly export sales report is causing some traders to rethink the recent market gain. Cattle trade is mixed with limited but firm gains developing in nearby contracts as traders try to regain market support. Corn markets are lower in light early trade. Stock markets are higher. Dow Jones is 70 points higher with Nasdaq up 27 points.

LIVE CATTLE:

Open: Mixed. Early trade is contained within a very narrow trading range with prices 10 cents lower to 5 cents higher in nearby contracts. The mixed moves in outside commodity markets is causing some market shifts, allowing traders to back away from midweek market swings due to the light trade volume. The potential for live cattle to establish support levels in April and June contracts could be huge in redeveloping buyer interest through the near future. At this point, it is expected that most buyers will hold out until after April 1, allowing noncommercials to adjust positions through the end of the week, as they close the books on first-quarter activity. Cash market activity remains quiet early Thursday morning following light to moderate trade in most areas Wednesday. The early-week sales activity seemed to shock most in the market, not only that packers were more aggressive than usual with bids, but that feedlot managers seemed to be willing to take initial offers due to the softness in futures trade and fear follow through pressure may develop. Trade was seen at $125 to $126 live, $2 to $3 lower than last week, and $205 to $207 dressed, generally $1 to $3 per cwt lower. Bids are expected to develop in similar ranges to potentially slightly lower through the rest of the week, but the tone of the market seems to have been set. Asking prices on cattle still needing to be sold remain at $128 live to $208 dressed basis. Open interest Wednesday liquidated 4,751 positions (445,304). Spot month April contracts lost 5,926 positions (47,498) and June contracts slipped 29 positions (204,511). DTN projected slaughter for Thursday is 120,000 head.

FEEDER CATTLE:

Open: Steady to 50 cents lower. Light softness is slowly developing through the feeder cattle trade with traders focusing on the mixed moves in outside markets and live cattle trade early Thursday. The overall focus will continue to be driven by movement in live cattle trade and the ability to find support levels through the end of the month. With month and quarter end fast approaching at the end of the week, there is expected to be additional noncommercial market adjustments developing in the next two trading sessions. This may add increased volatility through the complex as traders square books, overlooking general fundamental market issues at this point. Cash index for 3/26 is $142.15 up $0.11. Open interest Wednesday fell 452 positions (53,291).

LEAN HOGS:

Open: $1 to $2 lower. Lean hog traders are quickly adjusting to the realization that sales of pork to China is not a sure thing, as export sales reports posted no new sales of pork to China. Following the past two weeks of pork sales to China, the market seemed to expect continued and steady buying activity in order to spark additional buyer activity through the entire hog complex. There is still some hope and optimism based on trade talks which are taking place through the end of the week in China, but the emotional support seen over the last couple of weeks continues to cool. Cash hog trade is steady to $2 higher. Most bids are expected $1 per cwt higher Thursday morning. Open interest fell 531 positions (284,318). April fell 1,790 positions (26,373) and June fell 57 positions (84,133). Cash lean index for 3/26 is $69.50 up $2.37. DTN projected slaughter for Thursday is 477,000 head. Saturday runs are expected at 146,000 head.

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

(BAS)

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