DTN Early Word Opening Livestock

Cattle: Steady   Futures: Higher   Live Equiv: $144.24 -0.43* 
Hogs:   Steady   Futures: Mixed    Lean Equiv: $ 91.17 -0.62**
 
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Strong late-week buying moving into cattle trade last Friday is expected to stimulate additional interest in both live cattle and feeder cattle trade. The underlying support redeveloping in the complex will need additional confirmation, but if follow-through gains develop early in the week, this should be enough to establish support levels and bring buyers back into the complex. The overall pullback in the complex the last couple of weeks should be enough of a market correction to reset additional long-term buyer activity with June live cattle futures trying to build on $112 per cwt price levels. Cash cattle trade is expected to remain sluggish, although the early-week activity in the last month is expected to stimulate additional interest the next couple of days. Bids and asking prices are likely to remain undeveloped Monday with showlist distribution and inventory-taking the main focus of the day.

Lean hog futures are expected to remain sluggish in a narrow-to-moderately mixed trading range early Monday morning. The overall lack of support in the complex last month has created overall uncertainty in the entire market, although traders still look for potential to move additional pork into developing export markets through the upcoming year. The lack of developments in the latest round of trade talks with China as well as increased tariff levels that went into place on Friday is making it hard to imagine that China would actively step in to purchase large amounts of pork in the near future. But the need to fill protein and pork needs in China and other Asian areas will continue to grow, leaving the market supported. Cash trade is called steady to $1 lower Monday morning with most bids steady. Expected slaughter Monday is at 468,000 head.

	BULL SIDE		BEAR SIDE
1)	Friday's feeder cattle gains has sparked additional buyer interest in the entire cattle complex. This is expected to create additional follow-through support early in the week.	1)	Boxed beef values have tumbled sharply the last two weeks, following the moves in futures and cash trade, but also creating concerns that markets may not be able to fully recover before summer.
2)	Continued beef movement in early May is expected to spark additional buyer interest following lower wholesale price levels the last couple of weeks. With warmer weather developing, increased grilling activity is expected, stimulating overall beef movement.	2)	Moderate-to-active losses in cash cattle values last week not only focused on the erosion of market prices, but the early trade seemed to indicate that feeders wanted to do business early before prices continued to erode. This could further weaken cash cattle business during the week.
3)	The announcement that African swine fever has been found in Hong Kong is expected to spark increased demand interest to the complex with the reality that the outbreak is far from under control and will continue to impact herds in Asia.	3)	Increased tariff levels on China goods and the expectation that additional tariffs are expected to be rolled out will no doubt cause retaliation from China and impact pork products and ag products significantly.
4)	Light-to-moderate buying in deferred lean hog futures late last week is expected to focus on increased underlying support for traders to step back into the complex following a moderate to strong retraction last month.	4)	The inability to give positive market direction following last week's trade talks is causing many market watchers to feel that any chance of a trade deal is falling apart. This will continue to remain a main concern for the entire pork complex and will likely add increased volatility to lean hog trade.

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

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