DTN Early Word Livestock Comments

Cattle: Steady to Lower Futures: Mixed Live Equiv $148.12 +1.09

Hogs: Higher Futures: Mixed Lean Equiv $ 79.90 +0.24**

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

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

General Comments:

Cash cattle interest still remains light Wednesday morning following limited cash cattle trade seen over the last couple of days in the South. Although not enough cattle have traded to establish a good market trend, prices seem to be generally steady to weak from last week's prices so far. Trade over the last couple of days has developed at $104 to $107 per cwt, with most trade at $105 to $106. This would be steady to $1 per cwt lower than last week in the South. Northern trade still remains quiet and may stay that way until late in the week. The ability for boxed beef values to continue to climb higher ahead of the Labor Day holiday continues to limit the pressure seen early in the week surrounding the Cattle on Feed report. Traders continue to separate near-term and long-term trade as the increased placement levels seen in Friday's reports have little immediate impact in fall cattle supplies and short-term moves in price levels. But this does cloud the outlook for cattle coming to market during the first quarter of 2021. The worst part of the higher placement levels in July is that it created a reality check that increased placements are likely to continue over the next few months as the significantly reduced placement levels seen during the spring months are finally being placed into feedlots. Until boxed beef price gains start cooling down, it is likely that live cattle futures will hold near the top end of recent trading ranges with October futures hovering between $105 and $110 per cwt over the near future.

Lean hog futures have benefited most from the recent pressure in cattle trade as trades, which have previously been ignoring the lean hog complex, have quickly and steadily moved back into the hog complex, giving nearby and deferred contracts additional life. Spot October contracts have moved well above $55 per cwt levels, following strong triple-digit gains Tuesday. This has moved prices to new short-term highs and breaking through resistance levels set in June. With the seasonal pressure in pork demand expected after the Labor Day Holiday, it is uncertain if there is enough momentum in the complex to break through May highs near $60 per cwt. The ability to hold prices within the current trading range over the next few weeks will help to spark additional technical buyer support through the lean hog complex. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents Higher. Slaughter Wednesday is expected at 484,000 head. Saturday runs are expected at 272,000.

	BULL SIDE		BEAR SIDE
1)	Strong gains in boxed beef values continue to develop through late August. To date, there is little indication that Labor Day buying has wrapped up in the wholesale market, creating hopes that stronger beef demand will continue well into September.	1)	Cash feeder cattle futures may have set seasonal and yearly highs over the last couple of weeks, creating concerns of further price pressure in futures and cash markets as increased feeder cattle become available over the next couple of months. .
2)	The ability to regain buyer support in live cattle and feeder cattle futures sparked widespread interest in the entire cattle market. The focus on firming fundamentals despite expected long-term pressure, could lead to firm late August price support in futures trade.	2)	It is only a matter of time before wholesale beef demand starts to slow, going into seasonal pressure following the Labor Day Weekend. This could create a moderate price reversal in both boxed beef values and futures prices.
3)	Strong additional gains in cash hog prices have focused on the narrowing of the price spread between futures and cash prices. Aggressive packer interest to gain access to additional hogs should help to further cash price moves during the week.	3)	Despite the recent rally in lean hog futures, prices seem to have limited upward momentum given the current availability of hogs in the system and uncertainty about demand growth over the coming weeks and months.
4)	Triple-digit gains in lean hog futures have quickly broke through resistance levels, moving to three-month highs. The ability to hold current buyer support is adding additional technical bullishness.	4)	Gains in pork cutout values have started to slow during the week, indicating a market top may be near. If pork values start to shift lower during late August and early September, moderate-to-firm price pressure is expected to follow in futures and cash trade.

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

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