DTN Early Word Opening Livestock

Cattle: Steady  Futures: Mixed  Live Equiv $142.97 +0.52* 
Hogs:   Mixed   Futures: Mixed  Lean Equiv $82.68 -3.46**
 
*   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 trade remains quiet Thursday morning with just a few cattle sold midweek. This is not enough to establish a market trend with overall activity near a standstill. Trade will pick up over the next two days, as packer interest is likely to improve during the day Thursday. Initial bids are likely to develop in the same range as before, at $109 live and $180-plus on a dressed basis. Asking prices remain firm at $112 to $115 live and $185 and higher dressed. It is not unlikely that active trade will be pushed into late Friday at this point given the recent movements in futures and wholesale beef values. Firm underlying pressure seen midweek is likely to leave trade mixed with a combination of follow through pressure and short covering developing during morning trade. Limited volume is expected early Thursday, which could allow for wide market price levels until additional interest moves into the complex.

Continued underlying support is expected to move into lean hog trade Thursday morning. The bounce higher Wednesday was sparked by optimism of trade talk plans between the U.S. and China during next week's G-20 Summit meetings in Japan. Although realistically it is not likely that a deal will be reached through these talks, the fact that both sides appear to be willing to continue discussions is encouraging and creating significant hope through the entire hog complex. Traders will also closely follow the export sales report Thursday morning, looking for any significant changes in sales and shipments to China in the last week. Although moderate sales over the last few weeks have had little impact on overall price levels, traders are more focused on either no sales, or a large sale, in order to significantly impact overall lean hog prices during morning trade. Cash trade $1 lower to 50 cents higher Thursday morning with most bids steady. Expected slaughter Thursday is at 476,000 head. Saturday runs are expected at 88,000 head.

	BULL SIDE		BEAR SIDE
1)	Firmness in wholesale beef values midweek was a welcome sight following recent softness over the last week. The ability to move additional product ahead of the upcoming Fourth of July holiday is creating moderate support through the complex.	1)	Live cattle futures remain stuck in a wide sideways trading range with little indication of breaking out of this lethargic pattern anytime soon. This could not only limit price direction, but erode open interest through the next several weeks.
2)	The stalemate in cash cattle trade is indicating additional firmness in feedlot managers demands. Despite futures softness, cash trade is being pushed to the tail end of the week, creating potential for firming cash values over the next couple of days.	2)	Despite packers' short-bought position going into the week, the absence of early week cash cattle trade is creating concern that beef packers may be willing to forgo active trade if they are not able to buy cattle at lower price levels. This could limit plant runs over the next couple of weeks.
3)	Strong gains in nearby lean hog futures has sparked underlying interest in all hog trade once again. This is helping to bring about increased trade interest based partially on hopes that trade talks with China next week are positive.	3)	Sharp losses swept through pork cutout values Wednesday afternoon with triple-digit losses developing. The concern that current supplies are becoming burdensome and summer pork demand is not able to keep up with production is causing increased weakness.
4)	Traders are closely watching export sales of pork to China numbers. Significant increases in china sales is likely to spark follow-through pork buying.	4)	Despite recent gains, the lean hog complex remains under pressure with prices near three-month lows. It is going to take several days of firm buyer support to change the weaker market trend that currently exists.

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

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