DTN Early Word Opening Livestock

Cattle: Steady   Futures: Mixed   Live Equiv: $144.78 +0.54* 
Hogs:   Steady   Futures: Mixed   Lean Equiv: $ 93.25 +2.08**
 
*   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 activity is expected to remain sluggish early Tuesday morning with bids and asking prices still undeveloped. But the overall tone of the market is expected to improve as packers start showing indications of needed supplies and the potential that early-week trade may be done. A significant amount of trade last week in the North was sold for delayed delivery, so it is uncertain just how aggressive packers will be once again since they bought cattle over a longer delivery point last week. Southern trade has started a pattern of trading cattle early in the week, and the next couple of days will determine if that trend will continue. Futures trade is called mixed with a combination of follow-through liquidation and short-covering developing in the entire complex. The potential bounce higher in outside markets may cause cattle futures to quickly shift away from early-week losses.

Limit losses in lean hog futures Monday have not only continued to bring aggressive pressure to the entire complex, but the focus on trade deal concerns with China has sparked uncertainty of longer-term direction in the hog complex. Nearby futures still remain well below long-term support levels set in early March, but with traders backing away from previously aggressive market expectations based on China demand has quickly softened the entire complex. Outside market gains during overnight trade would indicate a moderate-to-strong market correction may develop in lean hog trade, although the expanded trading limits could allow for markets to swing in either direction. Cash trade is called steady to $1 lower Tuesday morning with most bids steady. Expected slaughter Tuesday is at 472,000 head.

	BULL SIDE		BEAR SIDE
1)	Firm underlying domestic beef movement helped to support the overall boxed beef market despite the wide market swings lower Monday.	1)	Sharp widespread losses through all commodity markets Monday led to aggressive pressure early in the week. This erased late-week support and left traders concerned about further support in most commodity markets.
2)	Japan continues to be a strong trading partner where beef exports are concerned. This relationship is expected to spark some additional underlying security through any trade talks and negotiations in the near future.	2)	The weaker tone in cash trade last week is expected to add even more uncertainty the next couple of days. With futures trade shifting sharply lower, cash cattle buyers are likely to significantly reduce early bids Tuesday.
3)	Long-term demand for domestic and export pork sales remains strong with overall expectations that continued developments of African swine fever will be a major issue the next couple of years, and spark increased overall world demand for pork.	3)	Limit losses has allowed for expanded trading limits in lean hog trade Tuesday. This may create additional downside market pressure that could take out additional short-term support levels through the complex.
4)	Sharp triple-digit gains in pork cutout values Monday temporarily diverted some of the attention away from the sharp limit losses in futures trade. The need to move additional pork to domestic and export markets has continued to focus on seasonal product needs such as ribs and bacon.	4)	Trade tensions with China continue to be a major concern for the pork industry at a time when China's need for pork is the greatest it has been for years. This may continue to limit the market access of U.S. pork based on price levels due to tariffs levied on product.

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

(BAS)

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