DTN Early Word Opening Livestock

Cattle: Steady to $1 Higher   Futures: Mixed   Live Equiv: $137.71 -0.34*
Hogs:   Steady to $1 Lower    Futures: Mixed   Lean Equiv: $ 76.42 -2.17**
 
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Packer interest is expected to improve Thursday morning, although it is uncertain that bids will improve early in the day. There still remains a wide range between asking prices and midweek bids, and this may continue, leaving the uncertainty that trade will develop until sometime Friday. The firmness in cattle futures is likely to spark renewed resolve by feedlot managers as they hold tight to asking prices of $114 live and $184 dressed through Thursday. Futures trade is expected to open mixed following the light-to-moderate midweek correction. The overall tone of the market remains firm, which is likely to spark renewed overall interest through the end of the week. Continued pressure in beef values and overall concerns about short- and long-term export demand for beef continues to add uneasiness through the entire complex, but traders are focused on technical support building in feeder cattle and live cattle trade, which may break out of the weaker trend seen through most of the spring.

Firm underlying support in nearby lean hog trade this week has helped shift the attention away from long-term lows as August futures have rallied over $5 per cwt over the past two trading sessions. This is adding increased underlying support even though volatile moves in wholesale pork values may curb the overall optimism through the end of the week. Mixed trade is expected Thursday morning with light-to-moderate shifts developing through the first couple hours of trade. Continued concerns of global pork exports due to trade issues will continue to be the focus and could limit further market gains at the end of the week. Buying in pork futures has clearly broken away from the weaker trend, but traders will need additional confirmation in order to determine that the two-day market shift is more than a major market correction. Cash trade is called steady to $1 lower Thursday morning with most bids steady. Expected slaughter Thursday is at 477,000 head. Saturday runs are expected at 38,000 head.

	BULL SIDE		BEAR SIDE
1)	August live cattle futures are holding near $107.50 following the sharp market rally last week. With prices now $5 per cwt over what is expected to be summer lows, traders are starting to focus on additional upside market potential through the month of July.	1)	Light-to-moderate pressure midweek in nearby live cattle trade is creating concerns that further active buyer interest may erode through the end of the week. If prices are unable to move above May highs near $109 per cwt in August futures, a potential sideways trend may redevelop.
2)	Active support is expected to develop in cash cattle trade with cattle feeders likely to take advantage of the futures market support with elevated asking prices likely to hold late into the week. This could force packers to steadily increase bids through the next couple of days.	2)	Continued pressure in beef values continues to add concern in the entire complex with traders focusing on domestic and export beef demand as the answer to sluggish wholesale price support.
3)	Triple-digit gains in nearby futures led to August futures moving above $80 per cwt for the first time in nearly three weeks. The aggressive shift higher is indicating a change in market trend, sparking renewed interest.	3)	Sharp losses in pork cutout values have quickly cooled the overall support through the complex this week. Without firm underlying support building in pork cuts, it is going to be hard to continue active support in futures trade.
4)	Traders will closely watch the Export Sales report Thursday morning, looking for increased sales to China. A significant bounce higher in pork exports could add expectations of potential long-term trade talks between the two countries.	4)	Mixed trade is expected early Thursday as traders focus on a combination of follow-through buying and position taking. This could limit end-of-the-week support and limit overall gains through the next couple of weeks.

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

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