DTN Early Word Opening Livestock
Lean Hog Market Support Likely to Redevelop
GENERAL COMMENTS:
Cattle: Steady Futures: $1 Higher Live Equiv: $143.91 +0.55*
Hogs: $1 Lower Futures: Mixed Lean Equiv: $ 74.77 -0.15**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Cash cattle trade remains undeveloped early Thursday morning with feeders still looking for the first bids of the week. Asking prices remain hard to pin down due to the holiday limiting overall market activity. A few showlists have been priced at $125 per cwt in the South, although interest from feedlot managers will need to improve Thursday. It is likely that packers will show the first signs of interest Thursday also, although trade is unlikely to develop until sometime Friday. Futures trade is expected mixed to mostly lower, with traders closely focusing on outside market direction. The pressure in feeder cattle markets midweek has created some market pressure during early January, which could lead to additional market shifts.
Early cash bids expected steady to $1 per cwt higher with most bids expected to be steady to 50 cents per cwt higher. Interest is likely to remain firm following firming cash market support and renewed buyer activity in the first trading session of January. This may spark some additional underlying buyer activity. Total slaughter schedules for Thursday are expected to be around 477,000 head. Saturday runs are expected at 460,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Moderate-to-strong buyer support moving into beef cutouts Wednesday has created additional expectations of moderate-to-strong trade support during early January. | 1) | Feeder cattle futures have turned lower after the New Year's holiday, creating concern that additional market corrections will develop after the late-December rally brought increased volume to the market. |
| 2) | Feedlot managers are expected to focus on higher cash cattle trade by the end of the week. This will likely limit any desire to reduce asking prices, unless there is a strong market shift in live cattle futures. | 2) | Price pressure the last two trading sessions have created growing concerns of follow-through pressure in early January. After setting contract highs in late December, market uncertainty is growing, allowing bearish market tones to grow. |
| 3) | Active buyer interest has moved into nearby lean hog futures trade. This has pushed spot-month February futures $1.50 per cwt higher, and distancing itself from recent market lows in the last week. This may add increased trader volume to the complex the next couple of days. | 3) | Pork values were unable to move higher in the first trading session of 2019, as overall concerns of continued trade uncertainty is still hovering over the market like a dark cloud. |
| 4) | Gains developing in cash hog prices has helped to rekindle additional buyer support, as packer interest continues to remain strong going into the month of January. | 4) | Aggressive buying activity, which moved into the soybean complex, has the greatest impact on pork production costs. A combination of weather changes in South America and trade issues will continue to be a major factor in overall pork costs through 2019. |
Rick Kment can be reached at rick.kment@dtn.com
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