DTN Early Word Livestock Comments

Cattle: Steady to Lower Futures: Higher Live Equiv $134.43 -1.20*

Hogs: Steady Futures: Mixed Lean Equiv $ 68.50 +0.50**

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

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

General Comments:

Following another round of light-to-moderate trade Wednesday, the overall lack of support in cash markets seems to be focusing on the generally weak undertone as packers continue to have easy access to needed cattle even though overall plant speed has returned to a pre-coronavirus level. The backlog of cattle in the system still leaves feeders with limited options in the cash trade as a "take it or leave it" packer mentality continues. Cash cattle trade is expected to hold in the current market range through the end of the week, with live deals hovering from $92 to $95 per cwt, mostly $94 to $95 per cwt, while dressed trade is at $152 to $155 per cwt. This is about $1 per cwt live basis below last week's average, and steady to weak from trade early in the week. At this point, both sides are gearing up to wrap trade up by the end of the day with the desire to head into the weekend covered for needs next week. Futures markets will remain closed Friday and will close early Thursday, ahead of the holiday. This will likely limit additional market participation through the Thursday session, although the firm gains on the first trading session of July is helping to rekindle expectations of further support, limited as it may be. Thursday's slaughter is expected at 121,000 head.

Underlying market pressure is likely to continue in lean hog futures trade Thursday as traders temporarily break away from long-term market moves and likely focus on end-of-the-week positioning. With markets closed Friday due to the Fourth of July holiday, the continued concern about price, recent long-term lows and abundant hogs available to the complex, continues to weigh on price levels. Currently, all nearby contracts are trading below $50 per cwt, creating a generally weak market structure as limited demand support is likely over the near future. The hope that strong pork demand surrounding holiday movement will bring a sense of price stability still exists, but the sheer mass of hogs available is likely to limit any extended upward market swings. Cash hog prices are expected $1 lower to 50 cents higher with most bids expected steady. Slaughter Thursday is expected at 468,000 head. Friday slaughter is expected at 200,000 head. No Saturday runs are expected due to the Fourth of July holiday.

	BULL SIDE		BEAR SIDE
1)	Strong underlying support in all live cattle futures late Wednesday is helping to bring renewed buyer support back to the complex during early July. With August futures still trading well below $97 per cwt, there is potential that further long-term gains may start to trickle back into the complex based on expected growth in beef demand.	1)	With August live cattle futures still holding well below $100 per cwt, the concern that prices could hover within this lower price range through much of the summer is causing concern about further buyer support redeveloping in the near future.
2)	The upcoming holiday weekend is creating optimism for growth in beef demand and the ability to clear additional product through retail and food service channels. The focus on feature activity of beef products surrounding the long holiday weekend could aggressively move large amounts of beef into consumer hands over the next few days.	2)	Sharp gains in grain markets has quickly sparked increased production costs to all cattle breakeven levels. This may continue to cause pressure to live cattle and feeder cattle trade over the near future based on the expectation that new-crop corn supplies are likely to be lower than previously expected due to acreage reductions.
3)	Pork cutout values appear to have stabilized with increased gains seen midweek. The ability to ratchet cash hog and pork values higher during early July will go a long way in bringing additional buyer support to the complex.	3)	July through October lean hog futures continue to struggle with prices below $50 per cwt. These price levels are limiting new trade volume with some traders expecting prices to hover within this trade range over the near future.
4)	Active slaughter has so far been unphased by the uptick in COVID-19 cases across the country. This has allowed packing plants to maintain active and aggressive schedules to further reduce the backlog of hogs in the production system.	4)	Little market activity is expected Thursday ahead of the holiday weekend. This can allow for wide but volatile price shifts due primarily to lack of volume and can shift from fundamental or technical market direction.

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