DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Lower Live Equiv: $144.74 -0.32* 
Hogs: Steady to $1 Lower Futures: Lower Lean Equiv: $ 70.76 -1.90**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Packer interest is expected to develop through the day with bids becoming more available as the day continues. Even with more bids, the wide gap between previous bids and asking prices is unlikely to gain much attention. Packers have gone into the week short-bought once again, but trade may easily be delayed until sometime Friday. Live cattle futures are expected mixed to mostly lower in initial trade as the limited pressure developing midweek is causing some additional weakness through the entire complex. Contracts remain well entrenched in the narrow but well defined trading range seen in the last two weeks. This is likely to keep markets contained for the near future, unless additional market shifts develop.

Cash hog markets are scheduled to remain steady to $1 per cwt lower Thursday with most bids expected steady to weak. Renewed winter weather conditions are moving through some areas once again, leaving hog transportation a challenge for the third week in a row. Overall plant operations are not expected to be as hampered as last week, but could still face delays the rest of the week. Futures trade is expected weaker with little market support in nearby contracts Wednesday, sparking underlying market pressure and causing many traders to refocus on growing supply levels. Even though prices may erode early Thursday, the potential for short-covering is quickly developing, allowing for increased market shifts through the end of the week. Slaughter runs are expected at 477,000 head Thursday. Saturday runs are expected near 214,000 head.

BULL SIDE	BEAR SIDE
1) Feeders have continued to aggressively hold to elevated asking prices of $126 to $127 live and $200 to $203 per cwt. The expectation is that cash market trade will continue to firm up through the end of the week based on growing packer needs.	1) Beef cutout values continue to show limited life during the first full week of February. Even though beef demand is expected to remain firm, beef values are slow to shift higher on lack of consistent buying activity.
2)Live cattle futures continue to hold in a generally stable price pattern despite the midweek pressure. The ability to regain buyer activity through the next two days, may bring bullish market shifts back to the complex.	2)Another round of cold and snowy winter weather is moving through cattle country. This is creating additional challenges with weight gain as well as causing transportation headaches for producers and packers alike.
3)The hopes of a developing trade deal with China continues to create optimism through the entire hog complex. Although there is no sign that anything is close to developing, any deal will support hog prices.	3) Continued aggressive pressure has developed in pork cutout values with firm losses in loin values and most primal cuts posting triple-digit losses. The inability to maintain active product movement is expected to further weaken the entire complex.
4) Strong market premiums continue to hold in late summer contracts with July and August contracts trading $18 to $19 per cwt above April futures. The expectation that hog supplies will slowly erode through the next few weeks going into spring and summer is likely to limit long-term pressure.	4) Despite remaining lightly traded, the February lean hog futures contracts have posted moderate pressure through the week. This moved prices below $56 per cwt, and broke through recent lows, causing additional bearish market trends to develop through the contract month.

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

(BAS)

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