DTN Early Word Opening Livestock

Cattle: Steady               Futures: Mixed    Live Equiv: $142.45 -0.67* 
Hogs:   Steady to $1 Lower   Futures: Mixed    Lean Equiv: $ 86.14 -1.82**
 
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Sluggish cash cattle market interest is expected to develop early Wednesday with increased packer activity likely to develop in most areas through the morning. Bids are expected to start at levels similar with Tuesday with live bids of $109, $175 dressed. Asking prices should hold well above these levels at this point in the week at $112 to $115 live and $185 and higher dressed. Given the trend for midweek trade over the last couple of months, there is moderate expectation that at least some deals will be reached before the end of Wednesday. But, given the back and forth in futures trade, there seems to be very little urgency to get cash cattle trade accomplished early in the week. Futures trade is likely mixed with light to moderate interest expected Wednesday morning. The inability for nearby contracts to hold firm early day gains Tuesday afternoon is creating expectations that prices may continue to wander in the moderate trading range seen over the last month. The current $5 trading range gives traders ample room to shift positions without developing any technical market reaction. This range could hold through most of the summer as limited fundamental market changes are expected in the near future.

Lean hog futures continue to defend support levels near $80.50 per cwt following a pullback in nearby support late Tuesday. The underlying tone of the lean hog complex remains extremely weak following a move to three-month lows late last week. Continued strong domestic production and eroding wholesale pork values are offsetting any building support in deferred lean hog trade. Traders continue to balance short-term direction with long-term support based on the potential of regaining access to the China market. Even though some trade will likely continue to trickle into the complex, the market has essentially dismissed recent sales to China reported over the last couple of weeks. Cash trade is called steady to $1 lower Wednesday morning with most bids steady. Expected slaughter Wednesday is at 477,000 head. Saturday runs are expected at 85,000 head.

	BULL SIDE		BEAR SIDE
1)	Moderate weakness in corn prices has created renewed buyer support across feeder cattle futures. This may spark some underlying support and help to stimulate noncommercial interest moving back into the complex.	1)	Market premium has been wiped out in nearby feeder cattle futures with all remaining 2019 contracts holding within a 73-cent trading range. This flat market is creating concerns that interest may be limited in the coming months.
2)	The potential for steady to higher cash cattle trade during the week is helping spark optimism in futures trade.	2)	Beef values have struggled to remain stable despite the upcoming Fourth of July holiday, which traditionally stimulates active beef demand. This may create long-term pressure.
3)	Firm buying interest continues to develop in late 2019 and early 2020 contracts as traders focus on long-term demand support potential keeping markets firming through the end of the year.	3)	Pork values continue to struggle following active pressure in rib and belly cuts, which traditionally are the mainstay of summer pork demand. This may create long-term pressure across all primal cuts.
4)	President Donald Trump announced on Tuesday that he will be talking trade with China's president when they meet next week at the G-20 summit. This creates hope that additional progress can develop.	4)	Lean hog futures remain near support levels set last week. A move below $80.65 per cwt in August futures would likely bring about increased liquidation with prices moving to the lowest level since early March.

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

(BAS)

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