DTN Early Word Opening Livestock

Cattle: Steady               Futures: Mixed   Live Equiv: $140.89 -0.69* 
Hogs:   Steady to $2 Lower   Futures: Lower   Lean Equiv: $ 79.18 +0.22**
 
*   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 is rolling into Friday after a lack of trade in most areas this week and limited interest by packers to this point. Even though light-to-moderate trade will develop sometime Friday, it appears that both sides are in no hurry or have no urgency to trade cattle this week. Bids are quiet, but the wide gap between bids and asking prices this week is not expected to change Friday morning, and will likely limit the overall movement of cash trade unless there are major changes during the day. Futures trade is expected to be mixed with end-of-the-month and quarter positioning being one of the main factors. This may add increased underlying support as the general market tone has firmed during the week. Front-month feeder cattle futures have rallied over $4 per cwt off of weekly and contract lows, allowing for potential support to redevelop during early July. Although beef market fundamentals remain generally weak leading into the month of July and Fourth of July holiday, the technical support in the complex is helping to regain underlying market stability.

Moderate early pressure is expected in nearby lean hog futures Friday morning as traders adjust to the gains in hog inventory levels after Thursday's report. Sharp triple-digit gains swiftly moved through the complex Thursday afternoon, with increased interest in potential overall pork movement and the expectation traders will continue to bounce off long-term lows during late June and early July. But a 4% increase in hog numbers as of June 1 is expected to curb optimism during the last day of June. Although the growth of hog inventory is not unexpected, the fact that the recent price pressure has not only limited current hog numbers, but farrowing expectations at this point are likely viewed bearish. Traders still focus on the significant need to feed the world with pork due to African swine fever causing significant production losses in China and other Asian countries. But the current trade issues with China remain the main roadblock in moving aggressive amounts of pork into this region over the near future. Cash trade is called steady to $2 lower Friday morning with most bids $1 lower. Expected slaughter Friday is at 471,000 head. Saturday runs are expected at 57,000 head.

	BULL SIDE		BEAR SIDE
1)	Strong midweek support in feeder and live cattle trade has sparked increased support through the complex. This may add increased underlying support at the end of the week, potentially moving through initial resistance levels at the end of the month.	1)	Beef values continue to erode through late June creating concern that overall pressure may continue to develop through beef market fundamentals, limiting overall support in futures trade during early July.
2)	Cattle feeders continue to aggressively hold their ground when it comes to cash cattle trade for the week. The lethargic interest and reduced bids by packers so far this week has not eroded resolve as asking prices remain firm from early-week levels. It appears that feedlot managers will be willing to carry inventory into early July rather than bow to lower bids at the end of the week.	2)	Sluggish trade Thursday seemed more focused on end-of-the-month adjustments following aggressive gains early in the week. The inability for traders to hold weekly gains could lead to firm weakness in the near future.
3)	Sharp gains flooded lean hog futures trade Thursday as traders continue to push prices off of long-term lows through the end of the month. Focus on long-term pork demand is expected to stimulate additional underlying support in the upcoming weeks.	3)	Hog inventory levels increased 4% from year-ago levels on June 1, as reported in Thursday's Hogs and Pigs report. This increased supply level in the nations hog herd is expected to add pressure to the complex, which is unable to gain ready access to the Chinese pork market due to the ongoing trade war.
4)	Trade talks at the end of the week with China continue to give a glimmer of hope when it comes to hog trade and increased access to the Chinese pork market. Just the idea of talking once again is a positive move that has been lacking over the last several weeks.	4)	Despite strong support Thursday, lean hog futures remain near long-term lows, with price only $3 per cwt above August 2018 support levels. The potential concern that additional long-term weakness will develop during early July based on growing pork supplies could limit commercial trader activity.

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

(BAS)

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