DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv $136.06 + 1.29* 
Hogs: Steady-$1 HR Futures: Mixed Lean Equiv $ 89.18 + 0.59**
* 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 market activity remains undeveloped early in the week with bids and asking prices nowhere to be found early Tuesday morning. The focusremains on the wild market shift lower in futures trade, although the strong upward movement in beef values during early December could help put more market stability back into both cash and futures trade over the next couple of trading sessions. Packers are expected to remain moderately short-bought as they try to make the best of the few normal processing weeks before the holiday schedules limit overall chain speed through the end of the year. Futures are expected to open mixed to moderately lower with follow-through pressure from the previous two trading sessions still creating a weak undertone in the complex.

Packers are expected to return to the complex with mixed to higher price levels early Tuesday morning. The full range of cash market prices is expected to remain 50 cents lower to $1 per cwt higher as traders continue to focus on the firmness developing in both pork values as well as continued support in the lean hog futures complex. Even though the cash market range is likely to remain wide, most bids will remain steady to 50 cents higher through early-morning trade. Futures trade is expected to remain mixed with a combination of follow-through support and position-taking through the morning. The underlying tone of the market remains firm with the focus on moves in February and April contracts.

	BULL SIDE		BEAR SIDE
1)	Sharp upward price shifts in boxed beef value continues to offset the recent tumble in futures trade as buyers continue to focus on building beef demand following the recent market pressure. With cutout values posting triple-digit gains Monday, the potential for additional meat buying is likely to help draw additional stability to the futures complex.	1)	December live cattle futures have broken through short-term support and moved through November lows of $17.10 per cwt during early-week trade. This move continues to create additional concern that more liquidation may follow. The next support level is set at $15.96 per cwt set through the middle of October. If these levels do not hold, it is expected that additional longer-term pressure may continue to be seen through early December.
2)	Live cattle futures continue to focus on increased market volume as price stability has begun in early-week trade. The ability to sustain stable price levels in a narrow trading range will help to build additional market momentum through the month of December, which is needed to set short-term support levels in nearby futures contracts.	2)	Lackluster cash market interest early in the week will continue to leave the cattle market directionless with overall cash activity not expected to develop until midweek or later. The recent market support may be quickly dashed by the strong pullback in futures trade.
3)	Firming buyer activity is expected to continue in pork values during the first full week of December. The strong movement higher in most primal values is helping to create additional buyer interest through the entire complex. This may bring additional underlying support to the market through the end of the year.	3)	Despite the strong upward market tick in futures trade, the inability to carry this support to the cash market level during early-week trade has caused some concern through the entire complex. Packers have access to a growing number of market ready hogs, which may limit overall spending and trickle down to further pressure through the entire complex.
4)	Continued strong buyer support is helping to draw longer-term market activity into nearby and deferred futures trade. With February and April futures holding values above $71 and $75 per cwt respectively, follow-through buyer support will likely move quickly into the complex over the near future. Packer interest will remain firm with an expected procurement rate of 465,000 expected Tuesday.	4)	The lack of consistency of futures support through the market is limiting the move higher in the complex. Even though strong gains developed in February through June contracts early in the week, December contracts remain under firm pressure as traders focus on a strong discount in spot month futures.

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

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