DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv $132.12 -1.07*

Hogs: Steady Futures: Higher Lean Equiv $ 72.38 1.43**

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

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

General Comments:

Activity in the cash cattle market remains sluggish with limited bids and asking prices early in the week. Although the recent trend of cash cattle trading early in the week could give hope of at least light trade trickling into the market on Tuesday. The higher average cash cattle price last week in Monday's price summaries of the previous week will likely add resolve to asking prices once they develop over the next couple of days. The five-area weekly average landed at $95.98 per cwt, $1.11 per cwt above the previous week, and could spark some underlying support going into the last half of July. If this trend holds, it could indicate that seasonal lows may have been set in the cash market, sparking underlying interest over the coming weeks as packer schedules continue to remain aggressive. Futures trade is expected mixed Tuesday morning. Limited fundamental market changes are seen over the short term, although the current backlog of cattle ready for market due to slaughter pace at or above year-ago levels continues to point to further supply tightness through the end of the year. The biggest concern facing the market both short and long term, is the inability to get a good feel on overall demand growth through the end of the year. Retail beef demand remains strong, especially after beef prices have pulled back significantly from historic highs, but the slow recovery in the food service industry is causing major questions about the ability to actively move beef through the system during the last half of the year. Tuesday's slaughter is expected at 121,000 head.

Buyer support in nearby lean hog futures trade Monday created follow-through buyer interest across the entire complex. This pushed prices above the $50 per cwt threshold that has been such a challenge to break over the past few weeks. There was aggressive buyer support in August futures on Monday as traders continue to focus on working through current supplies and steadily move product despite the uncertainty of active China demand. Even though lean hog futures may be able to establish firm price support at current levels, the ability to continue to steadily move prices higher over the near future may still be limited by eroding pork values and large hog supplies needing to find processing homes. Slaughter rates are expected to bounce higher through the rest of the week as packers actively focus on maximizing plant capacity while still adhering to the safety changes seen at plants over the last few months. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Tuesday is expected at 474,000 head. Saturday runs are expected near 198,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle prices posted a $1.11 per cwt rally from the previous week in Monday's five-areas weekly price report. This move higher focuses less on the price gains, and more on reversing the lower moving market trend seen over the last few weeks. This move could indicate a seasonal low has been established in cash cattle prices.	1)	Beef values have been unable to spark renewed interest despite the recent bounce in cash values and stability in futures trade. The inability to regain strong beef market support indicates the uncertainty about beef demand through the summer and fall months.
2)	Continued strong gains have developed in feeder cattle trade over the last few trading sessions. This has accounted for a $3 per cwt rally since early last week and moved to month-long highs. The focus on renewed buyer support in the complex is putting more emphasis on feeders focus of refilling feedlots.	2)	Limited follow-through buyer support in nearby live cattle trade created significant concerns through the entire cattle complex with August futures unable to hold $100 per price levels. The potential to bounce above and below the $100 threshold in August futures during most of the summer may create some stability but is likely to curb market support over the near future.
3)	Strong gains developed in cash hog prices Monday. Although prices still remain depressed, the focus on potential further support through the middle of July is rekindling market momentum.	3)	Pork cutout values tumbled lower once again, as concerns of long-term pork demand remain a major barrier in the ability for the lean hog futures to gain strong footing through late summer.
4)	Lean hog futures rallied higher Monday, moving August futures above $50 per cwt for the first time since late June. This could very well indicate a long-term change in market trend, potentially establishing seasonal support levels on which buyer support may build on through the next few weeks.	4)	Despite growing slaughter rates, the continued large number of hogs in the production system is likely to keep prices under pressure through the rest of the year. With August through December contracts contained within a $1.50 per cwt trading range, concerns of a flat market structure is limiting market participation.

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