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DTN Early Word Opening Livestock       03/22 06:23

   All Eyes Are on the Hog Complex  

   Limit gains in hog trade the last two trading sessions is bringing the focus 
on end-of-the-week direction into the complex.

By Rick Kment
DTN Analyst


  
Cattle: Steady      Futures: Higher   Live Equiv: $150.81 +0.20* 
Hogs:   $2 Higher   Futures: Higher   Lean Equiv: $ 80.71 +2.20**
 
 
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

   Cash cattle trade has once again made it to Friday without any significant 
indication from either side of how aggressive buyer interest will be, and the 
expectation that it may be late in the day before any deals are struck. Asking 
prices continue to hold firm with early-week levels as feeders focus on the 
stability in beef values, and potential demand support in the next several 
weeks and months. But packers are unwilling to ratchet up prices at this point, 
potentially limiting negotiated trade volume at the end of the week in order to 
minimize any added spending. Futures trade is expected mixed in light to 
moderate activity Friday as the continued support in feeder cattle trade based 
on supply uncertainty through the end of the year is expected to spark limited 
support through the complex. The March 1 Cattle on Feed report will be released 
following the market's close Friday afternoon, potentially creating some 
additional pre-report adjustments during the morning.

   Expanded trading limits are once again an option in lean hog trade Friday 
morning. This may continue to spark additional strong volatility in the complex 
that has had unrestricted buyer support the last couple of weeks. With the 
futures trade limit set at $4.50 per cwt Friday, the potential for wide market 
shifts at the end of the week continues to add uncertainty to the market. Even 
though strong buyer support remains in the market with expectations of further 
pork demand development, the complex is just one trading session away from a 
market reversal, which could break the momentum. Cash hog values are expected 
to redevelop steady to $2 per cwt higher with most bids $2 per cwt higher 
Friday. Expected slaughter Friday is pegged at 467,000 head, Saturday runs are 
expected at 164,000 head.  


   BULL SIDE                                BEAR SIDE
1) Expected lower cattle placements      1) Limited end-of-the-week support in
   through February is helping to build     boxed beef values is causing some
   limited support through the complex      concern that follow-through beef
   late in the week as traders continue     demand may not show significant
   to adjust positions ahead of the         support over the near future.
   Cattle on Feed report.

2) Cash cattle trade is expected to      2) Despite strong market shifts seen
   remain steady to firm following the      in feeder cattle futures, nearby
   recent support in beef values and        live cattle trade have been
   futures trade. Feeders have been         reluctant to shift higher. Traders
   unwilling to back away from strong       still remain capped by recent
   early asking prices, creating the        market highs, unable to break
   expectation that packers will adjust     through resistance levels at this
   their bids through the day.              point.

3) Limit higher trade for two            3) The higher and more aggressive the
   consecutive trading sessions has         unchecked market rally moves, the
   continued to escalate the lean hog       greater the potential that a break
   complex to contract highs. This          in momentum will cause widespread
   underlying support through the           market liquidation.
   complex is likely to bring about
   increased market support through the
   end of the week.

4) Concerns of the impact on African     4) Uncertainty about global pork
   swine fever on global pork production    demand support and the potential to
   has sparked increased underlying         continue to sell actively to China
   support through the entire complex.      and other major pork-consuming
   This may continue to solidify active     nations will continue to be the
   gains in futures and cash-market         main concern about steadily
   trade through the near future.           increasing overall demand through
                                            2019.

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


(BAS)

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