DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv $135.53 -0.68*

Hogs: Lower Futures: Lower Lean Equiv $ 70.83 +0.83**

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

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

General Comments:

Both sides of the cash market are expected to remain slow to show early-week developments following the continued market tumble in cash prices last week. Even though trade has continued to develop nearly every day of the week, last week's trade showed the narrowest trade ranges in over a month, creating potential consistency even though prices have continued to tumble lower. Trade last week ranged from $93 to $97 per cwt live and $152 to $156 dressed. As slaughter capacity levels move back to a more normal range with the inventory of market-ready cattle still burdensome on the market, the previous cash basis premium has quickly evaporated. August live cattle futures have held within a narrow sideways trading pattern over the last month, remaining well confined within a $1.50 per cwt trading range from $95 to $96.50 per cwt. The ability to hold current support levels above $95 per cwt even with the recent cash market pressure could help to bring some much needed buyer support to the market over the coming days and weeks. Cattle slaughter is expected to continue to remain strong, although overall weekly numbers are expected to dip through the week with limited Friday and Saturday kills due to vacation schedules. Monday slaughter is expected at 120,000 head.

Follow-through pressure Monday is likely in several contracts following sharp near-limit losses in most remaining 2020 contracts on Friday. With last week's bearish Hogs and Pigs report focusing on larger-than-expected market hog supplies available to industry, combined with struggling pork values and sluggish demand growth during the summer has created significant market pressure through the entire complex. Last week's market shift lower, quickly moved August and October futures well below the $50 per cwt threshold. This has created technical pressure in all nearby contracts that is likely to spark follow-through liquidation through the near future. Early-week hog slaughter is expected to remain strong, but the upcoming holiday will quickly limit production levels through the last couple days of the week and evaporate most Saturday runs. This will likely create even more concerns surrounding the ability keep the hog complex current, although the falling average hog weights over the last few weeks continues to limit the amount of pork being backed up in the system. Cash hog prices are expected $1 lower to 50 cents higher with most bids expected steady to weak. Slaughter Monday is expected at 471,000 head.

	BULL SIDE		BEAR SIDE
1)	Firm market premiums continue to hold in spring 2021 contract months with April futures trading at a $12 per cwt premium to current August futures. This focuses the attention on tighter long-term cattle supplies.	1)	Cash cattle prices continue to show moderate-to-strong pressure with prices falling $5 to $7 per cwt last week. This has quickly eroded the previously strong basis opportunities in the market.
2)	Active feeder cattle buying is being reported at steady-to-higher money with feeders looking for opportunities for market-ready cattle in early 2021. The continued pressure in grain markets, reducing feed costs is adding to the recent buyer support.	2)	Burdensome levels of market-ready cattle will continue to plague the cattle market through the rest of the summer and well into fall months. This could add even more price pressure cash and futures prices in the near future.
3)	Continued focus on reduced long-term herd size due to reduced farrowing intentions and less hogs kept back for breeding purposes is helping to spark renewed premiums in summer 2021 contract months.	3)	Sharp losses last week in hog futures continues to create technical weakness in all nearby lean hog trade. This is reestablishing long-term support levels below $40 per cwt based on recent market pressure in the complex.
4)	Active packers continue to chip away at the large amount of market hogs available to the market. This is expected to continue to erode overall hog weights going into the month of July.	4)	The upcoming Fourth of July holiday is expected to significantly cut weekly slaughter rates, which have been dependent on a strong Saturday slaughter over the past several weeks. Significant pressure in harvest numbers on Friday and Saturday will impact the ability to keep market-ready hogs moving through the system in an efficient manner.

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