DTN Early Word Opening Livestock

Cattle: Steady      Futures: Mixed    Live Equiv: $137.04 +0.40* 
Hogs:   $1 Higher   Futures: Higher   Lean Equiv: $ 81.46 +0.12**
 
*   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 expected to develop, although the tone appears to be set, following trade the last two days with prices steady to $1 per cwt lower than last week. It is likely that most trade will be done for the week, although with the release of two major cattle reports at the end of the day, any additional cash cattle trade could be delayed until after 2 p.m. Live cattle futures are expected to remain mixed during early trade with limited follow-through pressure developing in nearby contracts. An attempt for end of the week short-covering could push prices higher through morning trade. The heat wave sweeping across the country will continue through the end of the week in most areas, which will add heat stress to most cattle operations. At this point, the impact of this heat or any expected production or death losses is not having an impact on live cattle or feeder cattle markets. Market interest concerning weather conditions could be muted in the near future, but if grain markets start to focus on potential production losses once again, feeder cattle trade could see additional pressure.

Early trade is expected mixed in a wide range with limited additional direction expected through the end of the week. The strong underlying bullish move the last couple of weeks is expected to spark additional support through the end of the week. This may create fundamental support as cash and pork values are expected to remain firm through Friday. The uncertainty surrounding financial markets and overall direction of export markets continues to hang over the entire complex, but traders remain focused on firming domestic demand with the potential that light export demand from countries besides China will fill in the gaps, helping to slowly build underlying support. Cash trade is called steady to $1 higher Friday morning with most bids steady to 50 cents higher. Expected slaughter Friday is at 467,000 head. Saturday runs are expected at 17,000 head.

	BULL SIDE		BEAR SIDE
1)	Firming boxed beef values is expected through the end of the week, helping to bring additional underlying support to the entire complex.	1)	Feeder cattle futures remain unable and unwilling to shift higher as traders back away from short-term gains. This may create additional underlying pressure on Friday.
2)	Recent sharp pressure in corn futures is helping to reduce expected long-term feed and production costs. This should bring additional support to feeder cattle trade on Friday.	2)	Cattle on feed numbers are expected to increase nearly 2% from year-ago levels. This could spark follow-through weakness as traders adjust to supply concerns through the end of the year.
3)	August lean hog futures continue to test resistance levels above $83 per cwt. A move above this level at the end of the week is expected to spark increased underlying strength early next week.	3)	Pork cutout values show limited support as active pressure in belly cuts continues to undercut summer demand expectations despite it being the heart of "BLT" season. The lack of continued support in traditional summer demand for ribs and bacon could derail further support.
4)	Active price support is moving through cash hog trade as packers aggressively source hogs in order to keep active daily procurement levels of 477,000 head Monday through Thursday, and moderate plant runs on Friday and Saturday. This is expected to push cash bids higher at the end of the week.	4)	Despite the strong market rally over the last two weeks, an active market correction would come as a surprise to many. This could quickly bring additional selling interest into the complex at the end of the week.

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

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