DTN Early Word Opening Livestock

 
Cattle: Steady Futures: $1 Lower Live Equiv: $134.96 +0.10* 
Hogs: $1 Lower Futures: $1 Higher Lean Equiv: $ 85.90 -0.63**
* 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 activity remains generally undeveloped with just a handful of trades late Tuesday. This is muddying the waters going into the morning as both sides seem to be more spooked by the downward shift in futures trade than any fundamental market direction. With dressed trade scattered anywhere from $170 to $174 per cwt, it will be nearly impossible to establish a trend at this point. Bids are likely to become more active through midweek, but most of the needed trade is likely to be pushed off until sometime Thursday or Friday. Cattle futures are expected to be mixed to mostly lower with the previous pressure in feeder cattle futures likely to limit strong underlying support. A combination of follow-through pressure, and short-covering is expected in early trade, which may bring some needed stability to the entire complex.

Cash hog bids are expected to be steady to $2 per cwt lower once again, although most bids are likely to be steady to weak given the recent support in futures trade early in the week. Packers are still faced with ample market-ready hogs available to be sold, which will limit the upside of cash hog prices over the near future. Firm demand and the expectation that overall supplies will not remain burdensome through the fourth quarter is helping to spark optimism through all lean hog futures. This may help to bring additional trade volume to the market midweek. Total slaughter schedules for Wednesday are expected to be around 475,000 head. Saturday runs are expected at 232,000 head.

	BULL SIDE		BEAR SIDE
1)	Early interest in cash cattle trade is sparking some additional activity, which could help to firm overall cash values through the end of the week based on the need for packers to access cattle.	1)	Sharp continued pressure is developing in feeder cattle futures with triple-digit losses in all remaining 2018 contract months. This may spark some additional underlying weakness in all cattle trade.
2)	Live cattle futures continue to focus on market stability in all but lightly-traded October contracts. This ability to keep markets mixed Tuesday despite sharp losses in feeder cattle trade is building underlying market confidence.	2)	Beef values continue to show little market support despite the expectation that overall demand support is firming through the fourth quarter of the year. This may limit additional interest in all markets over the next couple of weeks.
3)	Underlying buyer support in nearby lean hog futures helped to post triple-digit gains through most of the session. Increased buyer activity is quickly moving back into the complex as prices adjust higher.	3)	Pork values continue to erode going into midweek. The concern that pork prices may not quickly follow future trade higher could limit the additional commercial buyer support moving into the complex over the near future.
4)	Open interest in lean hog futures has steadily increased through the week as overall commercial buyer support remains focused on riding the market surge higher.	4)	Weakness continues in cash hog prices with packers finding little to no reason to increase prices paid to producers given the ample amount of market-ready hogs available to processors. This may put a longer-term drag on the recent market support through the entire complex.

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

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