DTN Early Word Opening Livestock

 
Cattle: Steady Lower Futures: Mixed Live Equiv: $149.63 -0.63* 
Hogs: Steady Futures: $2 Higher Lean Equiv: $ 86.29 -0.44**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Limited activity is expected early Wednesday with traders focusing on the lack of late-day support in feeder cattle on Tuesday. The focus in the livestock market will return to the actively-traded hog market, which is expected to have additional uncertainty. Sluggish support in beef values has caused traders to back away from long-term support, limiting upward market direction for April, which is curbing trade interest. Cash trade is undeveloped at this point, and likely to remain sluggish until late in the week. Packers may start to show a few bids during the day, but unless widespread futures selling develops, most feeders will not be willing to sell early this week, despite the early trade last week.

The market rally Tuesday increased interest in the entire complex. The limit gains at closing bell Tuesday in May and June futures opened the door for expanded trading limits through the entire session. This will allow additional market volatility as follow-through support is likely based on expected short- and long-term pork demand growth through the end of the year. Trade interest continues to be linked to expectations of potential trade deals with China and their need to replace production lost because of African swine fever. But as strong as expectations are that this demand will develop, it is hard to pinpoint just how muchand how soon there will be active sales. This could add increased market swings to the entire complex. Cash hog trade is expected to be steady following the recent market pressure in early April. Expected slaughter Wednesday is at 477,000 head. Saturday runs are expected at 146,000 head.

	BULL SIDE		BEAR SIDE
1)	Comments from the USDA attache stated that African swine fever has bolstered demand for other meats, including beef. This could continue to stimulate export demand.	1)	Sharp losses in feeder cattle futures have limited trade support through the entire cattle complex. This is expected to create additional underlying pressure early Wednesday.
2)	April contracts continue to hold strong premiums to summer contracts, allowing increased interest in current beef values and potential cash market strength.	2)	Boxed beef values have continued to erode as traders focus on the lack of follow-through buying interest and the potential for additional strong support in the near future.
3)	Aggressive buying rekindled during early April, setting limit gains in nearby contracts. The active buying interest continues to focus on aggressive demand support potentially building through the end of the year.	3)	Despite strong futures trade, cash hog prices are slow to react following pressure early this week. This could limit packer buying in the next couple of days based on the short-term availability of market ready hogs.
4)	Expanded trading limits are available in all lean hog trade. This may help to spark additional underlying buying, with the potential to move nearby contracts to new contract highs.	4)	With so much market momentum built on rumors, hopes and expectations of further demand with China, there are still more questions than answers. This could add increased volatility to the market. As seen last week, prices have the potential to move lower, just as quickly as recent gains have developed.

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

(BAS)

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