DTN Early Word Opening Livestock

Cattle: Steady               Futures: Mixed   Live Equiv: $141.83 -0.70* 
Hogs:   Steady to $2 Lower   Futures: Lower   Lean Equiv: $ 82.32 +0.60**
 
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Limited cash cattle activity is expected on Tuesday with the early-week market pressure limiting overall packer interest during the morning. With showlists generally smaller, it is likely that packers will become more aggressive in searching for market-ready cattle earlier in the week, but the underlying pressure in the market may cause significantly lower initial bids. At this point, it is uncertain how feedlot managers will react this early in the week. They might hold out for potential market support later in the week, and higher prices, or they could cut their losses if pressure continues to develop through the end of the week, taking advantage of what basis opportunities they currently have. This could keep cash market activity variable the next few days, but currently bids and asking prices are not yet well defined. Futures trade is expected to remain generally weak. The ability to hold narrow gains in nearby live cattle trade Monday despite the sharp feeder cattle trade, is putting more focus on commercial support trickling back into the complex this week. With nearby contracts at or near contract lows, the concern of follow-through pressure remains evident for the near future.

Continued active liquidation Monday sparked increased pressure across the hog complex as traders continue to extend market losses, breaking through support levels and trading at 2019 lows. August lean hog futures have moved to the lowest market price since August 2018, creating additional long-term pressure in the complex. With traders focusing on current production levels that are not expected to change in the short term, as well as struggling export demand, continued pressure is possible in the near future. Although trade talks with China are taking place ahead of the G-20 summit in Japan this week, traders appear to have little hope that anything significant will come out of this round of talks, and overall export sales to China are likely to remain subdued through the foreseeable future. Cash trade is called steady to $2 lower Tuesday morning with most bids $1 lower. Expected slaughter Tuesday is at 476,000 head.

	BULL SIDE		BEAR SIDE
1)	Limited buying in nearby live cattle trade will provide potential market stability through the end of the month. This may stimulate additional underlying support through the next couple of trading sessions.	1)	Feeder cattle futures continue to post sharp losses during early-week trade. This has moved nearby contracts to contract lows, sparking renewed concern of follow-through liquidation through the end of the month.
2)	Given current beef demand expectations and the overall firmness of domestic support through the end of the year, beef values have the potential to firm up ahead of the Fourth of July holiday.	2)	Lack of support in wholesale beef values, combined with moderate-to-sharp cash cattle pressure last week is adding increased weakness to market fundamentals while technical pressure is redeveloping in live cattle trade.
3)	Lean hog futures remain oversold, creating the opportunity for renewed commercial support to move back into the complex through the end of the month.	3)	Lean hog futures have posted triple-digit losses at or over $3 per cwt, in the last two trading sessions. This aggressive pressure broke through spring support levels, and moved prices to August 2018 lows. The potential for follow-through liquidation is increasing through the week.
4)	Noncommercial traders continue to hold a strong long position in lean hog futures, at this point unwilling to liquidate, and ride out the current market shift lower. This is expected to stimulate underlying market support as this position continues.	4)	Firm pressure is developing in cash hog business as packers focus on the lack of support in futures trade, unwilling to continue the current spending pattern in the eroding market structure.

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

(BAS)

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