DTN Early Word Opening Livestock

 
Cattle: $1 Lower Futures: Mixed  Live Equiv $149.90 +0.27* 
Hogs: Steady   Futures: Higher Lean Equiv $84.84 -1.45**
* 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 trade has started to develop midweek for the second week in a row. It is somewhat surprising that activity has moved so quickly to midweek from the traditional Friday trade. The recent pressure in cattle futures has created some underlying concern that additional widespread market losses may continue to develop. Limited trade developing in the South at $124 live basis, is generally $1 per cwt lower than last week. Northern dressed trade is extremely limited, but seen at $205 in Iowa. Additional trade is expected to develop, especially in the north, but it is too early to tell if the trading range has already been well established. Futures trade is expected mixed as recent market pressure opening the door for additional early month weakness as traders test short-term support levels. A move below these levels would likely spark additional liquidation, although initial trade is expected to remain mixed based on combined short covering and follow through weakness.

Continued aggressive buying is seen through the week with traders focusing most of the attention on China. The potential and expections that a trade deal with China is "getting close" has sparked active market gains over the last couple of days with no indication that buyers will back away any time soon. But at the same time, being "close" to having a deal finalized, can be a long ways from getting it finalized. The final touches seem to be the trickiest part, and typically have the most complicated issues to deal with. With trade talks taking place this week, the hope for speedy agreements continue. Also the continued focus on African swine fever is creating expectations that China buying needs will grow with or without a trade deal. Cash hog trade is expected steady to $1 per cwt higher as weaker pork values are being offset by futures market optimism. Expected slaughter Thursday is at 477,000 head. Saturday runs are expected at 145,000 head.

	BULL SIDE		BEAR SIDE
1)	Renewed buyer support moved into wholesale beef values Wednesday. This may be the market strength futures trade has been searching for as overall beef values have slipped lower over the past several days.	1)	Cash market weakness is once again starting to develop with light midweek trade seen in several areas. The steady early-month weakness in futures trade has left feeders unwilling to chance additional market losses through the end of the week.
2)	Extremely active open interest remains well rooted in live cattle futures, with open interest holding near 440,000 contracts through early April. This indicates that traders are not yet willing to liquidate positions at lower price levels.	2)	April live cattle futures continue to hover just above short-term support levels set in March. A move below $125.70 per cwt in the next couple of trading sessions could spark additional longer-term weakness.
3)	A trade deal with China is nearing completion with reports that the deal is 90% complete. This is sparking underlying buyer support through the week as traders look for positive pork sales to be a byproduct of any trade deal.	3)	Traders are looking for a strong sale to China to be reported in the weekly Export Sales Report. If active sales are not seen, market pressure could quickly develop, similar to last week's price pressure.
4)	Renewed buyer support in nearby lean hog trade is testing contract highs once again. A move above March highs may spark additional interest through the entire complex.	4)	Wholesale pork values continue to struggle to find market stability through early April. Despite aggressive futures buying activity, without support in meat values, buying interest will quickly falter.

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

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