DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv: $151.22 +0.84* 
Hogs: $1 Higher Futures: Higher Lean Equiv: $ 88.11 +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:

Firmness in cattle futures late Monday is expected to provide additional underlying support in the live cattle and feeder cattle complex this week. Even though prices are expected to remain rangebound for the near future, growing support based on firming beef values and the ability to stimulate seasonal demand is likely to breathe additional life back into the complex. This may add some increased underlying support through April. Trade volume is likely to remain sluggish as a combination of follow-through buying and position-taking may still develop in morning trade as the focus moves to building on recent support levels set last week. Cash cattle trade is expected to remain sluggish with bids and asking prices still undeveloped until midweek or later. This could add some additional underlying uncertainty given the steady-to-lower shifts in the last couple of weeks, despite light-to-moderate trade taking place. Even though Wednesday trade developed the past two weeks, most activity is likely to be pushed to the end of the week, moving back to a more typical cash trade pattern.

Limited buyer support is expected early Tuesday morning following the early-week market adjustments thatposted strong nearby losses early in the trading session and held nearby contracts lower through most of the session. This may add increased underlying softness through the first couple hours of trade, although the tone of the market still remains bullish. With no significant details or developments coming out of last week's trade talks with China, the focus in the lean hog complex continues to once again move to the next expected gathering and the expectation that something will develop in the near future. A trade deal will develop at some point, and this will remain generally bullish for pork prices becauseAfrican swine fever continues to be the underlying theme, which is pushing market expectations due to the expected need for pork in China and other Asian countries. Cash trade is expected to be $1 lower to $1 per cwt higher Tuesday morning with most bids steady to weak. Expected slaughter Tuesday is at 475,000 head.

	BULL SIDE		BEAR SIDE
1)	Strong buying redeveloped in feeder cattle trade with late-summer contracts leading the complex higher Monday. This underlying support is dispelling concerns of growing supplies available for the rest of the year.	1)	Lack of consistent early-week support in live cattle trade Monday is causing concern that prices may struggle to move out of the wide sideways trend from early spring. Given current market structure, current range boundaries seem to be strengthening, limiting the upside market potential through late spring and summer months.
2)	Strong wholesale beef values once again developed Monday, putting the focus back on the overall seasonal demand and expected growth through the next couple of months. This is likely to spark additional buyer interest.	2)	With most of the focus on hog trade and the potential trade deal with China, the beef complex has gained little attention or overall market direction the last several weeks. This could limit overall trade interest in the complex, potentially eroding open interest through the next couple of months.
3)	Pork cutout values surged higher with triple-digit gains Monday. The shift away from choppy narrow market shifts in the last week is creating expectations of further additional support.	3)	Traders are closely watching this week's export sales report that will be released Thursday morning. If new sales to China are not listed, it is possible that trade disappointment will start to develop in the near future. Most of the previous market support was built on the expectation of aggressive China buying, which has yet to develop.
4)	Strong underlying futures support in deferred contracts continues to place the focus on long-term market adjustments. This is likely to spark some additional follow-through interest the rest of the week, as traders prepare for increased overall pork demand.	4)	Early-week pressure in nearby contracts could spark some underlying additional softness in nearby contracts, as additional price corrections are possible given the $10 per cwt rally last week. This may be sparked by little new news of a China trade deal.

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

(BAS)

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