DTN Early Word Opening Livestock

 
Cattle: Steady Lower Futures: Mixed Live Equiv: $150.38 +0.56* 
Hogs: $1 Higher Futures: Higher Lean Equiv: $ 86.66 -0.14**
* 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 Monday morning in the entire cattle complex. Traders are expected to return to the futures complex following wild triple-digit moves in each direction last week. The underlying firmness will continue with traders focusing on potential long-term support in beef demand and the potential for longer term interest. But Friday's pullback, which pushed April futures $1.50 per cwt lower, was a quick reminder that the move higher will not likely be a smooth one. Most of the shift lower Friday was based on profit-taking in nearby contracts, while feeder cattle futures closed narrowly mixed in a narrow range. The underlying pressure Friday continues to add uncertainty, although a firming tone is expected early in the week, which could lead to additional longer-term support. Cash cattle trade is expected to remain subdued with inventory taking and showlist distribution the extent of the market activity in the entire complex.

Firm underlying buyer support is expected to redevelop through lean hog trade Monday morning. Volume is expected to be light as traders continue to focus on additional early-week developments, such as signs of a developing trade agreement and details of pork exports in the trade deal, but filling the China market with needed pork continues to create significant market support. News reports last week posted several analysts stating that pork prices should increase 20% or greater through the year based on China demand. Much of this may depend on a friendly trade agreement, which would eliminate the import tariff already on pork productsdue to the ongoing trade war. There is still uncertainty about what the long-term impact of African swine fever will be in China, and the worldwide price of pork, but the need to fill the market continues to spark optimism and price strength. Cash trade is expected steady to $1 per cwt higher Monday morning with most bids scattered through the range. Expected slaughter Monday is at 475,000 head.

	BULL SIDE		BEAR SIDE
1)	Total open interest in live cattle trade remains near record highs set in late March, with a total open interest nearing 450,000 contracts. This aggressive buyer interest in the live cattle contracts continues to spark optimism through the spring and summer months.	1)	Sharp triple-digit losses late last week in April and June contract months started out as position-taking, but the continued pressure has added caution to the entire complex.
2)	All active live cattle contracts continue to hold above the 40-day moving average price. This has continued to spark additional buyer interest through the entire complex during early April.	2)	Boxed beef values have continued to slowly erode through most of last week. This lack of seasonal support in the complex known as "grilling season" is creating some underlying concern that long-term market support may struggle through the next couple of months.
3)	July and August futures have continued to rally, moving well above $101 per cwt through early April, as long-term demand expectations continue to flood into the complex.	3)	Despite the strong rally in futures trade, wholesale pork product prices have become increasing inconsistent the last couple of weeks. The lack of steady follow-through support in pork primal cuts has caused increased caution through the market.
4)	New contract highs are seen in all contracts as traders remain bullish about expected domestic and export demand through the entire complex. This is likely to rekindle buying activity early Monday morning.	4)	There continues to be an extremely strong disconnect with short-term spot hog markets and long-term futures prices. The expectations of aggressive buyer support is not readily seen in cash prices or spot futures trade at this point, leading to some concern of potential volatility the next several weeks.

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

(BAS)

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