DTN Early Word Opening Livestock

Cattle: $2 to $4 Lower       Futures: Lower   Live Equiv: $142.53 +0.44* 
Hogs:   Steady to $1 Lower   Futures: Mixed   Lean Equiv: $ 82.43 -0.25**
 
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Light-to-moderate cash cattle trade developed in most areas Thursday afternoon. Although some additional clean-up trade may develop during the day on Friday, a weaker tone is expected. Live cattle traded from $108 to $110 per cwt. This is mostly $2 per cwt lower than last week. Dressed trade in the North was reported at $178 to $183, mostly $181 to $183 per cwt. This is generally $3 to $4 per cwt lower than last week as packers were able to focus on fears that further pressure may develop later in the summer after the Fourth of July holiday. The sluggish movements in beef values has also eroded plant margins, causing packers to reduce spending and will likely slow overall production levels during late June and early July. Futures are expected mixed to mostly lower with the firm losses in feeder cattle trade sparking increased underlying weakness. At this point, the market remains technically stable, with prices still hovering within the wide sideways trading range seen the last couple months. Attention through late Friday is expected to also move to the afternoon Cattle on Feed report. Expectations are mixed ahead of the report. If cattle on feed and placed numbers come in near estimates, it is likely that the report will have little market impact.

Sharp losses Thursday sparked underlying market weakness in all contracts. August futures are now testing three-month lows once again, as traders try to defend last week's support levels. A move below $80.62 at the end of the week would likely create additional underlying liquidation in the complex, adding even more pressure in the entire market. Traders remain concerned about the growing production costs to feed the aggressive production levels in the spring and summer while long-term demand support remains uncertain and based partially on doing increased business with China. Cash trade remains steady to $1 lower Friday morning with most bids steady. Expected slaughter Friday is at 468,000 head. Saturday runs are expected at 88,000 head.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle placements in the month of May are expected to slip from year-ago levels. This will help to move the focus away from steady cattle supply increases and may curb long-term beef production levels.	1)	Sharp cash cattle losses have continued to develop late in the week. With cash cattle trade mostly $2 to $4 per cwt lower than last week's levels, increased long-term concern about summer prices is seen in the entire complex.
2)	Underlying holiday beef demand is nearing with traditional support surrounding Fourth of July celebrations and gatherings likely to help support overall market stability.	2)	Active buyer support in grain trade has created increased liquidation in feeder cattle futures. The triple-digit losses Thursday is likely to spark additional underlying weakness in the entire complex.
3)	Continued hope is being placed on upcoming trade talks with China and is likely to create underlying market momentum. This may spark some increased noncommercial buying moving into the complex at the end of the week.	3)	Lean hog futures are testing technical support levels of $80.62 per cwt in August futures. A close below these levels Friday would likely spark further liquidation as prices move out of the recent market range and move to new three-month lows.
4)	End-of-the-week short-covering is likely in lean hog trade as traders try to bring renewed stability to the complex. The afternoon release of May Cold Storage report will also shed light on overall product movement, which is expected to be generally positive.	4)	Concerns about the ability to move pork to China despite the growing demand created by African swine fever is increasing each day a trade deal with China is not in place. There is growing uncertainty that the two sides can reach an agreement in the near future.

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

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