DTN Early Word Opening Livestock

Cattle: Steady  Futures: Higher Live Equiv $144.65 +0.22* 
Hogs:   Steady to $1 Lower  Futures: Mixed  Lean Equiv $89.07 +0.98** 
*   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 become more active over the next couple of days with initial bids potentially developing in the South either Tuesday or early Wednesday. The trend toward early-week trade in the South is starting to pick up momentum over the last month to six weeks, which is creating expectations of trade midweek or later. Asking prices in the North and South are still generally undeveloped, but expected to remain near $115 live and $185 and higher dressed. Futures trade is likely to bounce higher at opening bell with live cattle trade having expanded trading limits of $4.50 per cwt following the limit market move in August contracts Monday. The swift move higher Monday has broke away from concerns of moving through support levels and testing contract lows once again. With August futures at $106.30 per cwt, the next resistance level set at the end of May remains at $107.85 per cwt. A move above these levels could spark additional long-term support through the entire cattle complex.

Active buyer support quickly moved into lean hog trade early in the week with increased support likely to develop Tuesday morning. Fundamental support is redeveloping through the entire complex as strong futures market moves are being supported by stronger pork cutout values. Increased focus on maintaining strong export demand to Mexico is expected to help stimulate additional support which eroded over the last week surrounding the potential tariff levels and immigration deal talks with Mexico. Traders are also expecting follow through export sales to China despite the ongoing trade war in order for them to meet their domestic pork demand. This is helping to bring renewed support through the lean hog complex, although the upside market potential remains limited. Cash trade is called steady to $1 lower Tuesday morning with most bids steady to weak. Expected slaughter Tuesday is at 474,000 head.

	BULL SIDE		BEAR SIDE
1)	Limit gains in August live cattle futures is helping to stimulate additional buyer support through the entire complex.	1)	Limited early-week interest in cash cattle trade is causing some concern, especially in the South, as traders are starting to expect earlier and earlier trade over the last couple of months. This may limit active interest in futures trade early Tuesday.
2)	Expectations of steady to higher cash cattle trade is developing following early-week futures support and strength in wholesale pork values.	2)	Despite the strong support Monday, live cattle and feeder futures still remain in the bottom end of the trading range. This is still creating concerns of further liquidation which could quickly lead to new contract lows and further market pressure during the month of June.
3)	Consistent buyer support moved into the entire lean hog complex following limit losses Friday. Traders remain focused on rebuilding long-term demand support and expanding export markets which is helping to stimulate active buyer support across futures trade.	3)	Continued concerns surrounding trade with China looms over the entire complex like a dark cloud. Even though some pork is expected to continue to be sold to China through the coming months, trade relations between the two countries is limiting the potential for pork demand.
4)	Firm support developed in pork cutout values as active support redeveloped in several primal cuts, helping to redevelop expectations of firming summer demand for products like ribs and bacon.	4)	Wide ranging price swings through the last week is likely to lead to even more volatility as market stability is going to be hard to find given the wide market swings and emotional market shifts seen over the last week. This could allow intraday triple-digit moves to develop through the upcoming days.

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

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