DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv: $143.66 -0.36* 
Hogs: Steady to $1 Lower Futures: Higher Lean Equiv: $ 71.53 -1.06**
* 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 is returning to early-week sluggishness with showlist distribution and inventory-taking the main focus through the morning. Packers are moving into the first full week of February short bought once again, but this has become a constant pattern the last few weeks. The firmness in cash markets last week will create additional bullish expectations for feedlot managers, although trade is likely to once again be delayed until the last half of the week. Futures trade is expected to remain mixed to mostly higher during initial trade as the focus on last week's market correction may help to spark some renewed market support as traders try to establish a trading range within these current price levels.

Cash hog prices are steady to $1 per cwt lower once again with most bids steady to weak early in the week. Packers are getting back on track with regularly scheduled processing schedules following the weather challenges last week. This should allow for more stability as the week continues. Limited activity is expected in lean hog futures trade Monday, although prices are expected to firm during initial trade as traders focus on establishing market support through early February. Slaughter runs are expected at 477,000 head Monday.

BULL SIDE	BEAR SIDE
1) Firm cash market gains last week is sparking additional fundamental support through the entire complex. The ability to push prices $1 per cwt higher in most areas Friday as packers struggle with gaining enough cattle moving into plants to keep plants full is fueling further bullish expectations.	1) The lower price shift last week has eroded support in fall contracts, moving prices below both 40- and 100-day moving averages. This weakness in long-term market direction could quickly further impact the ability to bring traders back to the complex in all contracts.
2)Nearby live cattle futures continue to hold well above the 40-day moving average even following the strong price pullback last week. This is expected to continue to fuel technical support through early February.	2)Feeder cattle futures have continued to weaken going into February with recent support in corn and soybean markets adding additional pressure to nearby and deferred contracts.
3)Aggressive packer schedules are expected to redevelop through the week, allowing for potential firmness in cash values the next several days.	3) Pork cutout values continue to steadily erode, creating concerns that additional pressure will develop through February. This is causing additional underlying weakness across the entire complex.
4) Packer margins continue to remain relatively strong despite the recent pullback in pork values. This will continue to allow packers to aggressively fill plants during the month of February.	4) Pressure in lean hog futures has continued to break through short- and intermediate-term support levels through the last couple of weeks. The concern of supply growth and continued uncertain demand is adding to market pressure.

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

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