DTN Early Word Opening Livestock

Cattle: Steady               Futures: Mixed   Live Equiv: $144.79 +0.14* 
Hogs:   Steady to $1 Lower   Futures: Lower   Lean Equiv: $ 88.77 -0.30**
 
*   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 levels in cash cattle trade are likely to remain subdued through the morning Wednesday with bids and asking prices expected to be more defined through the day. Given the overall lack of interest developing Tuesday and wide market swings in futures trade early in the week, it is uncertain how active feedlot managers will be to sell cattle early in the week. Even though the trend has move toward midweek sales in the South, it would not be surprising that the volatility through cattle trade may push deals back until Thursday or Friday. Packers are expected to show more interest through the week, although at this point, it is uncertain how aggressive bids will be as they continue to remain committed to limited spending given the overall lack of movement in beef values. Futures trade is to be expected mixed with moderate follow-through buying trickling into nearby live cattle trade. Feeder cattle futures, which posted strong triple-digit losses Tuesday in reaction to double-digit corn market gains, are likely to remain generally weak as traders try to adjust to increased production costs.

Firm pressure is likely to redevelop early Wednesday morning following strong triple-digit losses, which tested daily trading limits Tuesday. Although hog futures did not close limit lower in any contract, the $2.95 per cwt loss in December contracts sparked firm underlying pressure in deferred contracts as traders remain concerned about long-term demand, while focusing on the long-term impact of higher corn prices. December contracts continue to hold a strong discount to summer contracts, leading to additional liquidation over the near future. July futures remain under pressure with Tuesday's losses putting recent support levels back in view. Currently, July futures are trading $1 per cwt above last week's lows. A move below this level is likely to spark follow-through liquidation and continue the downward market trend seen over the last three months. Cash trade is called $1 lower to 50 cents higher Wednesday morning with most bids steady. Expected slaughter Wednesday is at 476,000 head. Saturday runs are expected at 63,000 head.

	BULL SIDE		BEAR SIDE
1)	Strong late-day support Tuesday in live cattle futures is rekindling commercial buyer support in the complex.	1)	Strong gains in corn prices have quickly eroded previous support in feeder cattle trade with higher production costs impacting futures and cash values paid for cattle going into feedyards.
2)	Packers are expected to remain short-bought going into the week, creating the potential for firm cash market support in all areas before the week is over. This may spark some additional underlying fundamental support in the live cattle complex.	2)	Limited support in wholesale beef values is creating short- and long-term concerns about the ability to expand beef demand at higher price levels for the rest of the summer and early fall months. This could limit upward support in cash markets.
3)	Strong cash hog prices levels developing Tuesday could position the hog market higher despite recent pressure in futures trade. This may limit downside market moves.	3)	Sharp triple-digit losses that developed Tuesday are sparking additional concerns of long-term market pressure in the lean hog futures trade. This could lead to long-term liquidation midweek, and may further extend the lower market trend seen over the last three months.
4)	Strong domestic demand is expected to continue, which is solidifying wholesale price values, especially in traditional summer cuts such as ribs and pork bellies.	4)	Wide market shifts this week have created increased volatility in the market as prices have moved higher and lower in triple-digit ranges in seven of the last eight trading days. This lack of market consistency is creating a choppy but narrow market range that is testing long-term support levels.

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

(BAS)

Copyright 2019 DTN/The Progressive Farmer. All rights reserved.