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
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
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
Rick Kment can be reached at email@example.com
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