DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Higher Live Equiv $132.44 +0.62*

Hogs: Lower Futures: Mixed Lean Equiv $ 71.86 +1.47**

* 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 Monday in the cash cattle arena remained quiet with both sides content with pushing any business down the line. It is possible that more activity will be seen Tuesday, but it is more likely that active sales will be pushed off until Wednesday or later. The expectation is growing through the market for higher cash cattle this week, continuing the firm but consistent price moves seen over the past couple of weeks. Last week prices, bounced $1.42 per cwt higher from the previous week in the five-area weekly average price. This moved the weighted cash average price to $98.66 per cwt. It is likely that another $1 to $2 per cwt gain is expected by many market watchers as the cash values continue to inch higher on a more stable but consistent basis. But the fact that cash values are still in the sub-$100 per cwt price range heading into the month of August is adding some concerns about the ability to sustain consistent gains through the fall months. It is likely that a few bids will develop before the end of day Tuesday, and maybe some potential trade, but the bulk of business is likely to be delayed until the last half of the week. Futures trade continues to break through resistance levels, setting five-month highs in nearby contracts. Even though firm support remains intact, the concern that price levels are nearing the top end of potential gains could limit further technical buying interest during the next couple of weeks. Tuesday's slaughter is expected at 119,000 head.

Active weakness developed in lean hog futures trade Monday, leaving further concerns of follow-through pressure developing the rest of the week. The pull back in cash hog values combined with continued focus on readily available market hogs offset firming pork value moves Monday, leading to firm pressure throughout the entire complex. This general market weakness is expected to continue Tuesday morning, although the downside market moves are expected to be curbed by the already oversold market status. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents lower. Slaughter Tuesday is expected at 473,000 head. Saturday runs are expected at 229,000 head.

	BULL SIDE		BEAR SIDE
1)	Expectations of continued cash market strength as the week continues is limiting downward market pressure in futures trade. This could help to stimulate light-to-moderate follow-through buying in most contracts during early trade Tuesday.	1)	Feeder cattle futures are expected to be near seasonal highs given traditional peaks in late July. This could limit further market support through the last half of the year.
2)	Continued strong gains developing in stock market trade through the last couple of weeks continues to focus on potential widespread market support, which is helping to bolster underlying gains in most cattle trade.	2)	Concerns of long-term beef demand growth through the end of the year, while expected supplies remain readily available has some traders concerned that recent gains may be hard to sustain through fall and winter months.
3)	Pork cutout values posted strong triple-digit gains Monday. This move higher in wholesale pork values is expected to stimulate cash and futures buying later in the week but may not be enough to reverse the bearish market cycle.	3)	Sharp triple-digit losses in nearby lean hog futures Monday created additional bearishness in the complex. The move below $50 per cwt in both August and October contracts, with December teetering on this pricing point is adding widespread concern that follow-through pressure may develop.
4)	Lean hog futures continue to remain oversold as nearby contracts inch closer to long-term lows once again. Consistent support in cash hog values and pork cutout prices could quickly bring active buyers back into the market with nearby contracts able to move significantly higher before experiencing significant resistance levels.	4)	Cash hog values are slowly but steadily backing away from last week's gains. The inability to hold recent gains is adding even more uncertainty to buyer support.

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

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