DTN Early Word Opening Livestock

Hog Strength Expected to Temper

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst
(DTN file photo)

Cattle: $1.00 Lower Futures: Mixed Live Equiv: $150.58 -0.29*

Hogs: Steady Futures: Lower Lean Equiv: $ 72.34 +0.23**

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

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

GENERAL COMMENTS:

Limited cash cattle trade developed Wednesday running mostly $1 lower than last week. This was somewhat expected due to the steep decline of futures. Without a rebound of futures Wednesday, packers will hold for lower prices. Winter weather has moved back into cattle country, which could get buyers excited. It seems that that may not be enough to change packer sentiment. Feeder cattle were higher most of the day, but could not hold on until the closing bell. Live cattle closed higher after a day of futures trading in a price range of only $1. The close was not technically exciting leaving the potential for bears to have the upper hand.

April lean hog futures had a price swing of $2.60 Wednesday, but could not hold gains and dropped back into the close with a loss of $0.17. Spread trading seems to have been taking place between closer months and the deferreds. October futures closed $1.87 higher as traders appear to be friendlier to later contracts. Cutouts were able to increase again, but the exuberance seems to be slowing down. Futures are overbought and ripe for a correction that might take place by the end of the week.

BULL SIDE BEAR SIDE
1)

A winter storm moving through cattle country could hinder cattle movement or the desire of feedlots to move cattle. This might cause packers to become more aggressive.

1)

There is some uncertainty about overall beef values. Beef cutouts seem to be struggling, which may keep futures under pressure. The inside trading day did nothing to provide market direction.

2)

Even though cattle seem to have topped, prices are not expected to decline much in the foreseeable future. Demand has been good and futures have corrected the overbought condition leaving room for sideways to higher trade.

2) Light cash activity $1 lower than last week may set the stage for more business to be accomplished at lower prices.
3)

Hog futures have held onto gains with the exception of front-month April. Continued short-covering and buying strength should keep the higher trend intact.

3)

A futures price rally of the magnitude seen in lean hogs the past four days generally results in a market correction.

4)

Cash may be steady, but carcass values continue to gain. This is a sign of good demand keeping buyers aggressive.

4) There is still no confirmation of any real progress being made in the tariff war. Without evidence of increasing export demand due to African swine fever, futures may settle back.

Robin Schmahl can be reached at rschmahl@agdairy.com

(BAS)

Robin Schmahl