DTN Early Word Opening Livestock

Firm Cattle Support Expected

Rick Kment
By  Rick Kment , DTN Analyst
(DTN file photo)

Cattle: Steady Futures: Higher Live Equiv: $143.63 -0.60*

Hogs: Steady to $1 Lower Futures: Lower Lean Equiv: $ 69.32 -0.39**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Firm buyer support quickly moved into cattle trade late last week. This not only helps to drive additional longer-term support into the complex, but the firming cash market activity from late last week has helped to push nearby contracts back near contract highs. Firm support is expected to develop in the early minutes of trade Monday, although volume is expected to remain light with limited interest following the weekend break. Cash markets are expected to remain quiet through the day with showlist distribution and inventory-taking likely to be the only order of business. The firming late-day support in cash markets Friday should stimulate general market optimism, although both sides will be looking for confirmation on how many cattle were actually sold last week.

Limited new information is likely in lean hog trade with traders focusing on bids, which are expected to be steady to $1 per cwt lower. Most early bids are expected to be steady to 50 cents lower, as this has been the consistent pattern the last several days. Futures trade remains under pressure and will likely open steady to weak Monday. Given the recent market softness through the complex, prices are ripe for a correction, although any move higher will be fighting an uphill battle the next couple of days. Slaughter runs are expected at 478,000 head Friday.

BULL SIDE BEAR SIDE
1) Strong triple-digit gains developed in live cattle and feeder cattle markets following limited grain market direction after the crop production and supply and demand reports on Friday. 1) Extreme winter weather conditions through much of the Midwest as well as volatile temperature swings makes it incredibly challenging for feedlot managers to maintain healthy animals.
2)Live cattle futures are testing contract highs in nearby contracts once again. A move above $128.05 in April contracts will likely spark additional market support through the entire complex.

2)Beef values have been reluctant to respond with increased positivity through the first half of February. This is creating some concerns that overall demand for beef may start to slow, causing overall inventory to quickly build.

3)Firm premiums continue to hold in summer contracts with August futures holding a $19 per cwt premium over April futures. These premiums are holding well given expected strong supply levels in the next six months. 3) April lean hog futures are testing long-term and contract lows following sharp recent losses. A move below summer 2018 lows at $58.32 per cwt is expected to spark additional liquidation through the entire complex.
4) Firm pressure in corn trade continues to limit production costs in the hog complex. Continued focus on readily available corn supplies may limit feed cost gains through the spring and summer months. 4) Traders continue to point to questionable demand and uncertainty surrounding trade negotiations with China as major roadblocks is sparking additional buyer activity through the entire complex.

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

(BAS)

Rick Kment