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DTN Early Word Opening Livestock       12/12 08:16

   Lean Hog Markets Looking for Export News Thursday Morning   

   With the weekly Export Sales report released Thursday morning, hog traders 
will focus on China's involvement in the market over the last week. Cattle 
futures are focusing on defending the midweek rally with increased focus moving 
toward weekly cash trade, which is yet to develop.

By Rick Kment
DTN Analyst

Cattle: Steady             Futures: Higher   Live Equiv $143.27  -1.42
Hogs:   Steady to higher   Futures: Mixed    Lean Equiv $ 88.16  +0.07

*  based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue


   Cash cattle markets are slowly rolling into the last half of the week with 
both sides focused on extending their positions the next couple of weeks. 
Feeders still remain aggressive, with asking prices of $121 to $122 per cwt 
live in the South and $192 dressed in the North. Given the recent erosion of 
beef values and packer margins the last couple of weeks, it is likely that 
packers will be willing to let off on the throttle a little through the next 
couple of weeks. This could result in steady-to-lower cash cattle prices. The 
carrot of tighter supplies during early 2020 still remains strong incentive to 
put as much beef in coolers as possible, as packer margins still remain 
respectable. But this could change the recent direction of higher cash business 
in the upcoming weeks. Futures trade is expected to be limited as 
follow-through buyer support is likely to slowly step back into the complex 
following the sharp triple-digit rally in feeder cattle trade. The strong 
pullback in corn futures Wednesday allowed for increased focus on nearby and 
deferred feeder-cattle buying. This underlying support trickled through the 
live cattle market, helping to bring life to what had been a sluggish market 
affair for most of the week. It is uncertain just how much short-term market 
support remains in the complex, as limited interest is expected as the holidays 
quickly approach. Thursday slaughter runs are expected at 121,000 head.  

   Limited interest is expected early Thursday morning with the main focus at 
opening bell surrounding any significant changes in export sales to China in 
the upcoming Export Sales report. Given the moderate-to-strong sales in the 
previous two weeks, there is starting to be some increased momentum in the 
report, especially as China had announced last week that it will roll back 
tariff levels on certain pork imports from the U.S. The expectation is that 
China will continue to need to step up and buy additional pork from the U.S. 
the next couple of months, as the ability to increase imports from other 
trading partners seems to be limited by their overall supplies. But with the 
current trade negotiations going on, it is uncertain just how aggressive China 
will be over the short term. Limited movement Wednesday in futures trade may be 
the general tone of the market through the end of the week with traders 
focusing on limited changes in overall fundamentals through the end of the 
year. Cash hog prices are called steady to $1 per cwt higher Thursday morning 
with most bids expected to be steady to 50 cents higher. Slaughter Thursday is 
expected at 493,000 head. Saturday runs are expected at 308,000 head.


   BULL SIDE                               BEAR SIDE
1) Feeder cattle futures surged higher  1) The consistent day-after-day
   Wednesday, sparking potential upward    pressure in boxed beef values is
   support through the end of the week.    generally concerning to the entire
   Although strong corn market pressure    complex. At this point, futures and
   midweek seemed to be the main driver    cash markets appear to be showing
   of recent gains, spot contracts set     little concern, but the inability to
   new December highs Wednesday,           hold beef values through early
   creating additional technical           December adds concern for further
   support through the rest of the         market support.
2) Expectations of steady-to-higher     2) The inability to show significant
   cash cattle trade through the end of    beef export sales in the weekly
   the week have cattle feeders still      report may start to create some
   pricing cattle aggressively higher.     softness through the beef complex
   The desire to gain access to            leading into the holiday season.
   additional cattle in order to keep
   plants running at or near capacity
   through the end of the year may
   spark increased cash market support
   the next two days.
3) Continued upward movement in cash    3) The fear that China will not be a
   hog values is sparking increased        major destination for pork last week
   underlying support in the lean hog      in the morning export sales report
   complex.                                could add increased weakness to the
                                           futures complex through the end of
                                           the week.

4) All eyes will be on the weekly       4) Single-digit gains in pork cutout
   Export Sales report Thursday            values are not a necessarily bad
   morning. Not only will traders be       sign, but given the firm underlying
   watching overall export movement        support in cash markets, these type
   last week, but focused intently on      of numbers are not going to show
   China's involvement for not only        significant support in the lean hog
   current year sales, but also 2020       complex. Traders are looking for
   commitments.                            more aggressive gains in wholesale
                                           pork prices heading into the

   Rick Kment can be reached at


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