DTN Early Word Opening Livestock

Cattle: Steady   Futures: Mixed    Live Equiv: 136.80 -0.63* 
Hogs:   Mixed    Futures: Higher   Lean Equiv: $76.51 -0.48**
 
*   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 interest is expected to remain undeveloped Monday morning following light trade that trickled into the complex late last week. With firm cash price developing by the end of last week, further support is expected as the month progresses. Showlist and inventory taking will be the main agenda Monday with most trade expected to be pushed to the last half of the week. Futures trade is expected to open mixed following limited end-of-the-week support in live cattle while feeder cattle futures focus on the short-term correction last week. This may allow for additional trade adjustments through the morning until volume increases. A firm underlying tone continues to develop in live cattle trade, focusing on firm outside market support that has developed in the last couple of weeks. This is likely to spark renewed expectations of stronger longer-term beef demand as expectations of overall supportive markets continue to develop the next couple of months.

Light-to-moderate follow-through support is likely early Monday in lean hog futures following lean hog trade shifting higher in triple-digit ranges Friday. If August through February futures can hold gains from $1.32 to $1.62 per cwt, the bullish market support will be rekindled following the technical market shift higher seen last week. The ability to defend August futures at $80 per cwt will closely be watched as moderate-to-wide shifts may develop through the week with traders balancing long-term direction with opportunities for market correction. Cash trade is called $1 lower to $1 higher Monday morning with most bids steady. Expected slaughter Monday is at 477,000 head.

	BULL SIDE		BEAR SIDE
1)	Firm underlying support continues to develop in nearby live cattle futures. The recent rally has tested May highs, creating increased optimism through the entire complex.	1)	Beef values have yet to show significant support following firm gains in cash and futures trade. This is limiting the overall market optimism in the complex on concerns that beef demand may not grow significantly in the near term.
2)	Active cash market gains late last week helped to solidify the optimism in futures trade during the week. This will spark increased asking prices from feeders through the week as they attempt to continue the firming cash market trend.	2)	Strong pressure in feeder cattle trade focused on increased corn prices, but also created concerns that additional pressure may develop during the week as traders focus on market corrections following the most recent rally.
3)	Late-week buyer support in lean hog trade helped to rekindle long-term support in the complex. August lean hog futures closed at $80.65 per cwt Friday, the highest weekly close in over a month, and showing a strong market shift higher that is likely to gain market momentum.	3)	Pork cutout values continued to erode lower as questions of follow-through pork demand in domestic and export markets are seen during the month of July.
4)	Light-to-moderate support developed in cash hog values late last week, helping to bring additional fundamental support to the lean hog complex.	4)	Active hog procurement levels by packers put the emphasis back on aggressive and large supplies of market-ready hogs available to the market. This is expected to limit the upside potential of cash trade through the upcoming weeks despite recent futures gains.

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

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