DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv: $135.98 -0.30* 
Hogs: $1 Higher Futures: $1 Lower Lean Equiv: $ 85.42 +0.43**
* 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 in the cash cattle market is expected to remain quiet once again with bids likely at $174 dressed, and starting out near $106 on a live basis. At this point, it is uncertain just how much midweek interest there will be by either side, as active trade is not likely to develop until later in the week. Futures trade is expected mixed with limited interest likely to develop following the narrow market gains seen Tuesday. Nearby contracts are focusing on sustaining short-term support levels with October futures holding above $112 per cwt. Similar sluggish market direction is expected in feeder cattle markets as traders are focusing on outside grain market shifts through the end of September.

Firm market support is expected in cash market bids with early bids expected steady to $2 per cwt higher. Most bids are likely to be seen $1 to $1.50 per cwt higher as traders continue to take advantage of the firming pork complex as well as firm support in the lean hog complex. Limited trade is likely in hog futures early Wednesday morning with a combination of follow-through buying met by position-covering. Some moderate to firm market adjustments are likely the next couple of days as traders try to adjust positions due to end-of-the-month and quarter activity.

	BULL SIDE		BEAR SIDE
1)	Underlying support levels in nearby contracts have continued to hold after breaking away from the long-term sideways trend over the past couple of weeks. October's ability to sustain prices above $112 per cwt will likely continue to spark underlying market support.	1)	Limited activity midweek in cash cattle trade is pointing to what could be another sluggish and late-developing cash market move. This may limit overall widespread market strength.
2)	Strong underlying demand is expected through the end of the year with traders focusing on fair-to-good beef movement through domestic and export markets through the fourth quarter of the year.	2)	The strong price pressure early in the week has created some concerns that cattle trade could slip back into the previous sideways trend in the near future. The inability to sustain recent support may limit long-term buyer interest.
3)	Cash hog futures markets have continued market support with packers focusing on keeping procurement facilities full and have to continue to increase bids in order to do that.	3)	Strong market discounts to summer 2019 contracts have not changed significantly the last several weeks, leaving concern that traders still remain focused on aggressive short-term supplies through the end of the year.
4)	Nearby lean hog futures have continued to break through short-term highs, which is sparking additional underlying buying support through the entire complex.	4)	Wide price deviations in several pork cutout values is limiting the consistency of support through the pork product market. These prices are expected to continue to remain volatile through most of the fall and winter.

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

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