DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Lower Live Equiv $150.35 +0.68* 
Hogs: Steady Futures: Higher Lean Equiv $ 70.91 +1.38** 
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

A general disappointment by the trade about the Cattle on Feed report took the pre-report strength out of the market. Traders will settle down to following market fundamentals, which do not look too promising given the expectations for cash trading this week. Showlists were distributed, but nothing more than a repeat of last week. Business will wait until late in the week as packers and feedlots wait to see who will blink first. Beef production last week totaled 489.1 million pounds, down 0.5% providing nothing for market direction. June live cattle chart put in a double-top based on price action Friday and Tuesday. Double-tops are meant to be broken, and if this holds true, new contract highs may be a possibility in the near-term.

Lean hogs showed triple-digit gains for two consecutive days. Friday's gains broke above technical resistance, triggering further short-covering Tuesday. The rumor mill was working again Tuesday as hopes were relayed of China needing to come to the U.S. soon for pork. China's hog prices continue increasing, reaching the highest level in 14 months. Additional African swine fever cases were reported in China with two more provinces in Vietnam also reporting cases. However, until there is actual buying of pork and the hogs are on the boat headed for China, the recent price strength might be short-lived. Carcass values continue to increase supported by strong cutouts.

	BULL SIDE		BEAR SIDE
1)	Packers bidding steady with last week provides support under the cash market leaving feedlots confident cash prices will be no worse than last week with the potential for higher bids later in the week.	1)	Fundamentals may temper the exuberance of traders in the near-term unless packers raise bids this week. Otherwise there is sufficient cattle available for demand at steady prices.
2)	Although selling pressure pushed prices lower, no damage was done to the charts leaving the trend higher intact.	2)	Corn price continue to decline making new contract lows in May and nearly matching the low in July. This will keep feed prices cheap with plentiful supply encouraging cow retention.
3)	Hog futures have completed two days of aggressive buying. A short-covering price rally many times lasts three days, which would push futures higher yet another day.	3)	Hogs futures may run out of steam on a third day of strong gains as short-covering finishes and traders assess the potential of steady cash for the week.
4)	Reports of further African swine fever cases both in China and Vietnam should keep support under the market as demand may come to our shores soon.	4)	Rumors of China needing to purchase pork soon from the U.S. may not come to fruition any time soon as long as tariffs are in place.

Robin Schmahl can be reached at rschmahl@agdairy.com

(BAS)

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