DTN Early Word Opening Livestock

Cattle: Steady Higher   Futures: Lower   Live Equiv: $152.31 -0.24* 
Hogs:   Steady Higher   Futures: Lower   Lean Equiv: $ 88.61 -3.26**
*   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 developed early in the week in all areas with Southern trade steady to $1 per cwt higher, while trade in the North developed Thursday steady to $3 per cwt lower in both live and dressed markets. It is possible that additional trade may develop in the North during the day Friday, although the tone of the market has already been set. Trade in the South is likely to be wrapped up for the week, although the possibility of clean-up trade at the end of the week before month end is always a possibility. This may spark some additional cash market movement. Futures trade is expected to remain bearish following the aggressive two-day sell-off through the entire complex. Nearby futures have fallen nearly $6 per cwt the last two trading sessions, breaking through short-term support levels, and adding additional liquidation potential at the end of the week.

Limit losses Thursday were sparked by lack of sales activity to China in the latest Export Sales report. This quickly allowed markets to tumble $3 per cwt lower limited only by daily trading limits. With June through December contracts closing at limit losses, expanded trading limits will be in place. This will allow markets to move $4.50 per cwt in either direction Friday, adding potential volatility to the complex. The underlying tone of the market remains weak, although the potential for late-week short-covering is developing given the emotional swings in the complex the last couple of weeks. Cash trade is called $1 lower to $1 higher Friday morning with most bids steady to 50 cents lower. Expected slaughter Friday is at 464,000 head. Saturday runs are expected at 141,000 head.

   
    
     
      
BULL SIDE
      
BEAR SIDE
     
     
      
1) Recent market pressure in live cattle futures is leaving trade ripe for a strong market shift higher next week. Limited fundamental shifts is likely to help rekindle buying support in the near future as liquidation runs out of gas.
      
1) Cash cattle trade developed in the North Thursday, falling $3 per cwt below week-ago levels. This is adding concerns of further fundamental pressure the next couple of weeks.
     
     
      
2) Packers remain aggressively focused on gaining additional cattle during the first couple weeks of May. This is expected to lead to increased asking prices from feeders early next week.
      
2) Sharp triple-digit losses in all cattle trade has quickly allowed bearish market momentum to develop. The potential for additional end of the week losses is building given the moves below long standing support levels the last two days.
     
     
      
3) Cash hog prices continue to remain stable even with the recent market volatility with packers searching for enough market-ready hogs to fill aggressive procurement levels.
      
3) Limit losses in nearby lean hog futures continues to add uncertainty and long-term concern about hog market strength. This will add more volatility and potentially increase end of the week losses for the entire complex.
     
     
      
4) Despite the strong market pullback, lean hog futures still remain $15 to $18 per cwt above support levels during early spring. This continues to put the focus on long-term market strength in the entire pork complex.
      
4) Sharp losses developed in pork cutout values, led by a $22.78 per cwt loss in belly cuts. The concern is that additional strong erosion in other primal cuts will develop through the end of the month.
     
    
   

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

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