DTN Early Word Opening Livestock

Cattle: Steady           Futures: Mixed   Live Equiv: $151.38 +0.30* 
Hogs:   50 cents Lower   Futures: Mixed   Lean Equiv: $ 90.57 +1.32**
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Live cattle futures are expected mixed in limited early trade Monday morning with a combination of follow-through buyer support and early position-taking following the firm end of the week shift that developed on Friday. Traders continue to focus on the underlying direction of beef values, although the firmness in cash values last week may lead to additional longer-term support. Cash cattle trade is expected to remain quiet with any activity limited to showlist distribution and inventory taking through the day Monday.

Buyer support redeveloped in lean hogs late Friday, providing an underlying bullish tone to the market as traders expect to see additional long-term support based on needs China has for filling its pork demand. Some early-week market shifts are expected, although the underlying tone of the market is expected to stay firm in the early part of the week. It is uncertain just how much overall activity will develop as markets will be closed for Good Friday. Typically on a holiday week, overall trade volume remains sluggish, but given the expectation of additional pork movements due to domestic needs and exports to China, there is likely to be some additional market shifts in the complex. Cash trade is expected steady to $1 per cwt lower Monday morning with most bids steady to 50 cents lower. Expected slaughter Monday is at 475,000 head.

   
    
     
      
BULL SIDE
      
BEAR SIDE
     
     
      
1) Firm end of the week cash buying moved into the northern areas of cattle country Friday. This moved prices $1 to $2 per cwt higher from the previous week, adding support to the entire complex.
      
1) Live cattle futures still find themselves stuck in the wide sideways trading pattern. This market rut that has held through most of the spring creates a barrier, limiting additional support through the complex.
     
     
      
2) Active futures buying developed late last week, pushing June futures well above $121 per cwt. This move is helping to break away from the lower end of the trading range in the last month, potentially sparking additional longer-term support based on expected beef demand support.
      
2) Sluggish cash market activity is expected early in the week. It is uncertain just how much activity will develop this week with overall trade volume potentially sluggish with markets closed on Friday due to the Easter weekend.
     
     
      
3) The expectation in the hog complex is that additional strong and hopefully more consistent buying activity will be seen from China in the next several weeks.
      
3) The wide triple-digit swings in lean hog trade in the last several weeks is adding even more volatility to the entire complex. This opens the door for additional underlying pressure possible at a moment's notice with little to no fundamental technical reasoning.
     
     
      
4) Pork cutout values surged higher Friday with markets trying to keep up with the aggressive market shifts last week. This underlying support in the complex continues to add support to domestic and export trade expectations.
      
4) With June futures essentially the front-month contract, there is a strong disconnect between cash values and futures trade. This could create additional pressure in futures markets as traders try to align market activity following the expiration of April contracts.
     
    
   

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

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