DTN Early Word Opening Livestock

Cattle: Steady   Futures: Lower   Live Equiv: $143.37 -0.70* 
Hogs:   Steady   Futures: Mixed   Lean Equiv: $ 92.08 +0.54**
 
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Increased cash market interest is expected Wednesday morning with limited initial packer bids developing, while asking prices are expected to become more evident as the day develops. Given the overall tone of the cattle complex and wholesale beef values, it is likely that steady money at the end of the week would be considered a bullish move. Bids are expected to develop near $115 live and $185 dressed, but both sides will be closely focusing on the direction of futures trade during the morning. Limited volume is expected in live cattle and feeder cattle futures trade with the focus split between follow-through selling pressure and short-covering. Some additional adjustments are expected the next couple of days as traders try to prepare for Friday's Cattle on Feed report, expecting bearish market shifts developing due to increased supply levels in April. This may continue to add moderate-to-strong weakness through all cattle trade with feeder cattle markets potentially giving back the moderate gains from last week, testing short-term lows once again.

Despite lean hog futures still trading within the moderate-to-wide sideways trend set up over the last two weeks, renewed pressure in the entire complex has moved the emphasis back to concerns surrounding China and the ongoing trade war. Even though China will continue to need large amounts of pork to replace production lost by African swine fever, the breakdown in talks and the overall relationship between the two countries is making it evident that buying pork from the U.S. will be a last resort. Many market watchers continue to hold out hope that a deal will be established, or that domestic pork will move to other countries needs so they can export to China. But the overall outlook is becoming cloudy and traders seem to be losing hope of a quick resolution. Cash trade is called steady to $1 lower Wednesday morning with most bids steady. Expected slaughter Wednesday is at 465,000 head. Saturday runs are expected at 43,000 head.

	BULL SIDE		BEAR SIDE
1)	Expected beef marketed during April is expected to have shifted higher as Cattle on Feed pre-report estimates have been circulated. This continues to point to underlying strong spring demand.	1)	Traders are looking for record cattle placements and total on-feed numbers in Friday's Cattle on Feed report. This is confirming the previous market slide over the last month but is also adding additional pressure in the entire complex.
2)	With the Memorial Day holiday quickly approaching, traders are expecting a strong clearance of beef products following the cold and wet spring. Strong holiday demand could spark renewed post seasonal beef demand in the next several weeks.	2)	Strong underlying support in grain trade continued to add production costs to feeding cattle, which will negatively impact feeder cattle prices.
3)	Firm underlying support in pork cutout values not only focuses on improved product movement, but active price gains in several seasonal products is pointing to increased summer demand.	3)	The strong pressure in lean hog futures has moved away from long-term global demand support and shifted back to growing concerns with China. This shift will likely continue through most of the summer, limiting upside potential of pork values.
4)	Lean hog futures still remains well above short-term support levels, as market corrections continue to develop ahead of the holiday weekend. This is expected to rebuild buyer interest as traders shift prices within a sideways trading range.	4)	Cash hog values are expected to show additional weakness as packers limit overall plant schedules in order to limit the amount of hogs needed to purchase. This is an attempt to improve plant margins given the volatility in pork prices.

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

(BAS)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.