DTN Early Word Opening Livestock

Packers are expected to remain moderately short bought going into the week with overall cattle traded last week significantly lower than the previous week. With aggressive packer schedules still expected to be the main focus through the next several weeks, packers are searching for additional market-ready cattle. This is likely to help bring some stability back into the complex despite the recent futures pullback.

Feeder cattle futures continue to lead the market lower through the week with prices pulling back nearly $3 per cwt off of the market highs set at the end of last week. This may continue to draw underlying pressure to the complex as traders are well above initial support levels with little technical resistance to keep prices from shifting lower through the week.

Live and feeder cattle futures are still hovering in a sideways pattern as trade remains aggressively above where prices ended the month of January. The rally that developed late last week has created additional market cushion, allowing for live cattle futures to still maintain a firmer trend compared to where markets have traded through much of 2018. This is likely to add to the volatility and potentially bring increased buyer interest back to the market.

Despite moves in the Dow Jones Index regaining nearly half of the Monday losses on Tuesday, the overall tone of outside markets remains extremely weak with the Dow settling under 25,000 once again. This is likely to keep many cattle traders extremely cautious as they are not only concerned about the direct short-term impact to the futures market, but also how this will filter through to changing demand for beef over the coming months if the market volatility continues.

Aggressive packer activity through the week has continued to limit the amount of market ready hogs available to market. This is likely one of the reasons for the lighter weekend runs expected this week with an estimated 85,000 head scheduled to move through plants on Saturday. If market-ready hogs continue to be harder to gain access too, packers are likely to need to increase spending in order to maintain the recent daily norm or 465,000 head per day.

Aggressive follow-through pressure has developed in pork cutout values with the belly market leading the market tumble by falling nearly $17 per cwt over the last two trading sessions. The concern that additional widespread weakness may be seen in most primal markets, could lead to follow-through pressure in cash and futures trade in the near future.

At this point, trader support has remained firm across the hog complex with open interest activity maintaining a firm and steady level despite the pullback in prices. With traders not yet willing to liquidate aggressive positions, there is the potential to draw additional buyer support through the rest of February.

Triple-digit losses in nearby contracts have quickly eroded any sense of short-term support that was hoped for in hog trade during early February. April futures continue to move the market lower at $71.42 per cwt. These contracts are testing intermediate support levels of $71.17 per cwt in December. A move below that level would likely spark additional liquidation, putting a move below $70.68 as the next market target.