DTN Early Word Opening Livestock

Cattle: Steady  Futures: Mixed  Live Equiv $151.08 +0.56* 
Hogs:   Steady  Futures: Mixed  Lean Equiv $ 88.76 +0.83**
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Light-to-moderate trade developed Wednesday, with most of the activity in the South. This is the third week in a row that cash trade has started on Wednesday, seemingly starting a trend of earlier trade activity. Trade in the South was generally steady from last week's price levels at $124 per cwt. The limited activity in the North was at $204 per cwt, but this is not enough to establish a good market test, as more activity will be seen the next two days. Futures trade has remained sluggish through the week with light-to-moderate pressure developing in nearby and deferred contracts. Follow-through weakness is expected to continue the next couple of days, but traders are also focusing on the potential of mixed trade based on current trading ranges likely to remain intact through most of April.

Strong gains on Wednesday has added increased volatility to the complex after wide market swings this week. The potential to hold prices at the top end of the complex has continued to spark widespread market support. Although the quick and aggressive losses from earlier in the week is creating significant caution. The market remains a powder keg of emotions, which can explode at any time. Although there still is underlying expectations that large amounts of pork will be sold to China, the lack of knowing when and how much is making traders nervous. Traders will closely watch the Export Sales report Thursday morning. This will likely drive additional volume into the market and could spark aggressive moves in either direction through early trade. Cash trade is expected steady to $1 per cwt lower Thursday morning with most bids steady to 50 cents lower. Expected slaughter Thursday is at 477,000 head. Saturday runs are expected at 54,000 head.

   
    
     
      
BULL SIDE
      
BEAR SIDE
     
     
      
1) Long-term expectations of firming beef demand at steady-to-higher price levels is continuing to spark additional interest in the complex.   
      
1) Lack of buyer support moving through live cattle and feeder cattle trade has sparked uncertainty about the ability to bring additional buyer interest back into the complex. This may add even more price weakness at the end of the week 
     
     
      
2) The development of cash cattle trade at steady money early in the week may bring renewed buyer interest to nearby futures trade Thursday morning.
      
2) April blizzards in northern cattle country has created additional weather concerns. This will continue to hinder cow and calf health, as well as the wide temperature swings, which are likely to add respiratory concerns to many cattle herds.
     
     
      
3) Traders are closely watching export sales report numbers, looking for sales or shipments to China in the last week. Any China sales would likely spark strong buyer interest.
      
3) Lack of sales to China on the morning export sales report is likely to spark additional strong market pressure as traders continue to look for evidence that aggressive and growing sales to China will help support domestic demand.
     
     
      
4) Spot market moves and market fundamentals have remained generally steady to firm throughout the market volatility in futures trade. This shows strong but steady support for domestic pork demand despite global uncertainty.
      
4) Cash hog values have been unable to quickly follow futures markets higher in the last couple of weeks. This has created an increasingly widespread between spot markets and the rest of the complex.
     
    
   

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

(BAS)

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