DTN Early Word Opening Livestock

Cattle: Steady   Futures: Mixed   Live Equiv $151.61 -0.44* 
Hogs:   Lower    Futures: Lower   Lean Equiv $ 90.00 +0.72**
*   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 interest is expected to be limited with bids and asking prices likely unavailable through the first half of the day. This will limit any trade in all areas of cattle country until after the first of the month. With the development of Wednesday trade in the South becoming a more regular habit, it is likely that bids will either develop late Tuesday or early Wednesday. Asking prices are hard to pin down, and may remain that way through most of Tuesday, but cattle are expected to be priced near $130 live and $212 dressed. Futures activity is also likely to remain sluggish with mixed trade holding following the limited moves Monday in live cattle trade. The continued pressure in feeder cattle markets is allowing for some uncertainty concerning long-term supply levels that could further impact buyer interest in all cattle futures.

Continued pressure is likely to redevelop early Tuesday morning, although the weaker tone of the complex is going to be met by end of the month position taking as traders try to take advantage of the wide market swings and cover short positions before flipping the calendar to May. With June futures breaking through April lows of $88.50 per cwt Monday, the potential for further noncommercial liquidation is growing. The current wide trading range in the last two months is creating the potential for markets to swing within a $10 to $20 per cwt price range without sparking any major technical factors. Cash trade is called $1 lower to $1 higher Tuesday morning with most bids steady to 50 cents lower. Expected slaughter Tuesday is at 477,000 head.

   
    
     
      
BULL SIDE
      
BEAR SIDE
     
     
      
1) Firm underlying support in beef cutout values is helping to solidify overall demand. Choice cuts continue to expand the premium over Select markets, holding at $233.14 per cwt Monday.
      
1) Continued triple-digit losses in feeder cattle trade has eroded open interest in the entire cattle complex. This is leading to additional liquidation of commercial and noncommercial interest through late April.
     
     
      
2) The potential for moderate-to-strong buyer support moving into all nearby live cattle trade is growing with trades viewing the current complex as oversold given the $8 per cwt liquidation the last several trading sessions.
      
2) Underlying weaker tones early in the week through futures trade is expected to limit the ability for feedlot managers to command steady-to-higher prices through the end of the week.
     
     
      
3) Despite strong pressure in futures trade, pork fundamentals remain strong. Wholesale pork prices have shown increased support with firm gains developing in several primal cuts the last couple of days.
      
3) June lean hog futures has broken through April lows, and short term support levels. This leaves the next level of support near $75 per cwt set in early March, creating additional uncertainty through the complex.
     
     
      
4) The fact that African swine fever has devastated hog herds in China continues to be the major focus, and despite a pullback in prices, still leaves the need to replace pork lost by lower hog numbers. This will continue to be a bullish theme through the entire year.
      
4) Cash hog bids are starting to show increased pressure as packers put more emphasis on reduced spending due to reduced margins the past several weeks.
     
    
   

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

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