DTN Early Word Opening Livestock

 
Cattle: $1 Lower Futures: Higher Live Equiv: $149.82 -0.08* 
Hogs: $1 Higher Futures: Higher Lean Equiv: $ 86.80 +1.96**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Follow-through buying is expected to develop early Friday morning although volume is likely to remain sluggish in the first minutes of trade. The strong underlying surge in the market on Thursday sparked technical support through live cattle and feeder cattle trade, which is expected to spark additional buying interest. Although beef values have been slow to react at this point, it is likely that additional fundamental support will return to the complex early next week based on strong underlying support. Cash cattle trade remains sluggish following light trade in the South on Wednesday. Asking prices are at $127 live and $208 and higher dressed, but are likely to remain firm based on futures market activity. Packer interest should improve throughout the day, although it could be late in the day before business gets done.

The rekindled support in the last few trading sessions in lean hog futures is being driven by underlying expectations that a trade deal with China is "close." The definition of how close is uncertain, although there are hopes that there will be more information released through the week surrounding the current trade talks taking place in Washington. President Trump stated Thursday that he expects a "monumental deal to be announced in the next few weeks." It seems the overall lean hog complex may not be that patient in waiting, but for now, aggressive buying is being driven by expectations that China will be in the market to buy pork to meet domestic needs. The continued focus on African swine fever is creating more demand for pork supplies and allowing traders to remain bullish. Expanded trading limits are available for the entire lean hog complex Friday, potentially expanding the trading range even further at the end of the week. Cash trade is expected steady to $1 per cwt higher Friday morning with most bids 50 cents higher. Expected slaughter Friday is at 469,000 head. Saturday runs are expected at 145,000 head.

	BULL SIDE		BEAR SIDE
1)	Triple-digit market rallies developed in all cattle trade through the tail end of the week. This is expected to spark additional underlying gains Friday with technical support sparking increased interest.	1)	Boxed beef values have been unable to show significant improvement this week as traders still remain cautious about the ability to move increased volume of beef at higher prices.
2)	June live cattle futures led the complex higher Thursday, moving well above $121 per cwt, and breaking away from support levels near $119 per cwt. This bullishness in price levels and overall volume moving into the cattle complex is likely to gain additional momentum through early April.	2)	Cash cattle trade may have already set the tone for the week with early trade seen $1 per cwt lower than last week. Although feeders are becoming more aggressive given the futures market rally, it is uncertain if packers will be willing to offer higher prices, and may settle with limited trade for the week.
3)	Limit gains Thursday has moved nearby lean hog futures to new contract highs. July and August futures have surged above $100 per cwt as traders anticipate strong fundamental support the rest of the year.	3)	Cash hog values have been slow to respond to the most recent support in futures trade. With April lean hog contracts showing only limited support, there seems to be a disconnect between current market prices and expected long-term direction.
4)	Sharp pork cutout gains flooded back into the market as primal cuts have quickly responded to recent support in the futures trade. This is expected to add additional support at the end of the week.	4)	Despite the current market rally, the lean hog futures continues to be driven by emotional trade. Any sense of turbulence in the trade talks with China may quickly derail the most recent round of price surges in all hog trade.

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

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