DTN Early Word Opening Livestock

 
Cattle: Steady-$2 Higher Futures: Mixed Live Equiv: $142.16 -0.32* 
Hogs: $1.50 Higher Futures: Mixed Lean Equiv: $ 74.80 -0.40**
* 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 continues to remain generally undeveloped with asking prices expected to be restated similar to midweek levels at $126 live and $200 to $202 dressed. Packer interest is expected to improve through the day, although bids are not likely to quickly approach asking prices at this point. It is likely that trade will be delayed until Friday, although the direction of futures trade will have a major impact in the cash market direction. Live cattle futures are expected to remain mixed with early-morning short-covering developing as traders try to adjust to midweek pressure. The tone of the market continues to move higher, with the strong possibility that renewed contract highs may develop before the end of the week. This is likely to help solidify additional buyer activity through the entire complex.

Firm gains in cash trade are expected to continue midweek with bids steady to $1.50 per cwt higher. Most bids are expected to be 50 cents per cwt higher following the continued buyer support from last week and expected additional strength developing in futures trade. Futures activity is likely to remain mixed the first half of Wednesday. The choppy back and forth market direction during the week is limiting overall market direction, although prices slowly seem to be advancing, but it has been hard to sustain strong market growth across the complex. Continued uncertainty about trade negotiations is still limiting market interest. Hog slaughter is expected at 477,000 head Thursday. Saturday runs are expected to hit 195,000 head.

	BULL SIDE		BEAR SIDE
1)	The expectation is that additional cash market support will develop through the end of the week as feedlot managers remain firmly planted, with higher asking prices in tune with the recent market support in the futures.	1)	Limited follow-through support after setting new contract highs has created uncertainty through the entire complex. This could allow for additional market weakness to move through the complex through the end of the week.
2)	The underlying tone of live cattle trade remains firmly higher despite the pullback in prices Wednesday. The inability to sustain early-market pressure through the session is allowing buyers to step back into the complex.	2)	Beef cutout values have continued to erode, showing little strength from the recent activity in the futures trade. If these markets are unable to regain underlying support in the next couple of days, upward market strength is expected to be very limited.
3)	Strong gains have continued to steadily move into lean hog trade. This is helping to stimulate additional buyers support through the entire complex.	3)	Pork cutout values have quickly regressed following aggressive triple-digit losses in butt and picnic cuts midweek. The lack of consistent support in pork cuts is starting to create general market weakness during early January.
4)	Triple-digit gains in lean hog futures midweek is helping to spark additional underlying support through the entire hog complex. Despite limited deferred contract months, the tone of the market is quickly firming.	4)	There is limited buyer activity and support in deferred lean hog futures trade. The lack of consistency through the complex is putting more focus on short-term buying associated with cash market activity, more than the overall direction of the complex through the next couple of months. This may weaken trader interest in the next few days.

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

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