DTN Early Word Opening Livestock

Cattle: Steady to $1 Higher   Futures: Lower   Live Equiv: $152.55 -0.64* 
Hogs:   Steady to $1 Higher   Futures: Mixed   Lean Equiv: $ 91.87 -1.94**
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cash cattle trade started to develop in the South Wednesday, with light-to-moderate trade in Kansas and Texas at $125 to $127 per cwt. This is generally steady to $1 per cwt higher than last week's levels. The midweek trade may be enough cattle sold for the week in the South, but if not, it will likely set the tone of the market for the week. Interest in the North was generally quiet, and will focus on redeveloping bids the next couple of days. With Wednesday trade in the South becoming consistent the last few weeks, it may change the overall weekly flow of the market. Although at this point, any Southern business has been unable to move Northern trade from end of the week activity. Futures trade posted aggressive triple-digit losses following a technical shift lower that developed midweek. The inability to hold short-term support levels of $120 per cwt in June futures created additional liquidation. Weakness remains evident through live cattle and feeder cattle trade, allowing for additional follow-through pressure Thursday morning.

Light to moderate buyer support, which developed midweek in the nearby lean hog trade, is helping rekindle underlying support in the entire hog complex. Significant interest remains in overall demand strength and may continue to develop over the next couple of months surrounding a trade deal with China and additional exports due to China's need for pork. But the recent pullback in prices seems to have brought a sense of reality to the entire complex, which was needed following the emotionally driven buying spree based on essentially unchecked expectations of pork business coming from China. Traders are expected to be focusing on establishing a generally realistic and sustainable trading range that will account for moderate-to-strong domestic demand and still continued movement of pork to China. There is still little reliable information about the overall situation of hogs and pork production in China so it is going to be hard to pinpoint short- and long-term needs for pork. Cash trade is called steady to $1 higher Thursday morning with most bids steady. Expected slaughter Thursday is at 477,000 head. Saturday runs are expected at 143,000 head.

   
    
     
      
BULL SIDE
      
BEAR SIDE
     
     
      
1) Cash cattle trade has developed with prices steady to $1 per cwt higher in the South. This should bring some market stability through the end of the week.
      
1) Aggressive market pressure quickly swept through the entire cattle complex with feeder cattle futures leading the shift lower. This is likely to bring about spillover selling pressure through the end of the week, testing additional support levels in the near future.
     
     
      
2) Active domestic beef demand is expected to continue the next couple of months as warmer weather is stimulating additional grilling demand and travel activity through the spring.
      
2) Continued focus on growing cattle supplies in feedlots has quickly eroded previous expectations of increased underlying support through the end of the month. Eroding beef values is adding to the market weakness.
     
     
      
3) Firm futures gains in lean hog futures has quickly brought traders back into the complex. This is likely to spark additional buyer interest through the end of the week with traders refocusing on long-term demand growth.
      
3) Uncertainty in front of the weekly Export Sales report and any reported sales and shipments to China is likely to create market volatility. Traders seem to expect large continued sales activity and seem to be easily disappointed.
     
     
      
4) Traders and market watchers will continue to analyze and assess the weekly Export Sales report. Increased sales to China are expected to rekindle the bullish market support from the last month.
      
4) Sharp losses in pork cutout values Wednesday is likely to limit end of the week support. This may add some additional underlying volatility to the entire lean hog complex the next two trading sessions.
     
    
   

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

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