DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv $145.39 -0.60

Hogs: Steady Futures: Mixed Lean Equiv $85.42 +0.35**

* 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 markets remain extremely quiet with both sides unwilling to be the first to step up to the plate as of Tuesday. Given the holiday Monday, it is understandable that the process is delayed, but the lack of overall focus going into Wednesday morning as asking prices are still hard to find, as well as bids unavailable could delay active cattle trade until late in the week. The expectation that cash cattle trade will continue to slip lower due to ample supplies available and uncertain demand for fresh beef following the Labor Day holiday could also limit the enthusiasm for feeders to step into the market early in the week. Renewed support in futures trade is likely as traders continue to bounce off lows set last week. The ability to build underlying support in October futures at $105 per cwt heading into the fall months is expected to create underlying momentum through the complex. Traders not only focus on the uncertainty of beef demand growth, but the potential that the worst of the market pressure is behind us, breaking away from seasonal market trends in a marketing year that has not followed seasonal patterns to this point. Uncertainty remains about rebuilding beef demand growth in restaurant and food service industries. With a hodge-podge system of schools and colleges reopening in person or virtually for the fall, it is going to be hard to determine just how much overall end user demand there will be through the next couple of months. This could create volatile market shifts based on short-term beef value movements.

Firm underlying support continues to be built through the lean hog complex surrounding the Labor Day weekend. The ability to continue to spark underlying technical support in nearby contracts is bringing about increased buyer support, and testing resistance levels. October futures were unable to break through the $60 per cwt barrier Tuesday, although the potential for underlying follow-through buyer support Wednesday morning could quickly move prices above this threshold, sparking renewed underlying support across the complex. The recent gains in pork cutout values seem to be gaining additional momentum as traders return from the long weekend. This may spark increased longer-term buyer support, finally putting traders' minds at ease that the summer lows are well in the past. Mixed trade is expected through the complex with uncertainty of just how much renewed momentum will develop across the complex as traders are unwilling to get too far ahead of fundamental strength moving forward. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Wednesday is expected at 485,000 head. Saturday runs are expected at 407,000 head.

	BULL SIDE		BEAR SIDE
1)	Active triple-digit gains in nearby feeder cattle futures Tuesday is creating hope that seasonal lows have been set. The ability to sustain light-to-moderate buyer support in fall and winter feeder cattle contracts could help to establish long-term market support moving back into the complex.	1)	Continued pressure in boxed beef values is creating concerns that additional softness may develop through the upcoming weeks, putting even more pressure on the cattle complex through the next several weeks.
2)	A combination of commercial and noncommercial buying developed across cattle futures Tuesday. This is likely to add additional momentum as the week continues with traders building off recent lows, potentially using the holiday weekend as a distinct signal to spark additional long-term market support.	2)	Beef demand uncertainty continues to loom over the market as traders have a hard time pinpointing the ability to project overall usage through the end of the year. With many schools focusing on distance learning and retail foodservice demand still sluggish, there is uncertainty about how much product will be consumed over the coming weeks and months.
3)	Pork cutout values have continued to march higher during early September. This is helping to build underlying firm fundamental support as traders focus on the potential for increased gains in the coming days and weeks.	3)	Continued tensions with China will create a weak undertone through the lean hog and pork market. Although active export support has still developed through the summer months, less buying by China could quickly add bearish pressure to the complex.
4)	Lean hog futures have posted four-month highs with spot month futures testing resistance levels of $60 per cwt. A move through this level would likely spark renewed bullish technical buying as traders break away from the previously weak market pattern.	4)	The unchecked market rally last week in nearby lean hog futures has pushed prices $6.50 per cwt higher. This wide market swing is creating the opportunity for light-to-moderate price corrections in the near future, as traders may have the opportunity to square positions in the upcoming days.

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

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