DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Mixed Live Equiv $134.12 -0.12*

Hogs: Steady Futures: Mixed Lean Equiv $ 67.49 -1.74**

* 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 trade trickled into the market Tuesday. The moderate-to-strong support in futures trade over the last week has sparked increased overall support in cash values with Southern live prices reported at $94 to $95 per cwt. This is generally $1 per cwt higher than last week's average. Dressed trade posted a wider range but is still well below the wide gaps the last couple of months with trade contained from $152 to $160 per cwt. Most trade developed at $157 to $160 per cwt, which is $3 to $6 per cwt higher than last week. There is still a lot of cattle yet to trade through the week, although it appears that without a major disruption in futures trade or outside markets, the tone of the market is taking shape. With average carcass weights starting to slide lower, the focus on a more current cattle supply seems to be getting more attention, which could help support cash values through the upcoming weeks. It is important to realize that cash cattle prices and futures are currently focusing on different aspects of the market. Futures trade is focused on the expectation of tight cattle supplies through the end of the year, while cash markets are still bogged down with the currently heavy supply of market-ready cattle in the system, which is likely to keep cash values discounted to futures over the next several weeks. Futures trade is expected to remain mixed early Wednesday morning with limited overall direction shifts seen through the week. As packers return to more normal processing schedules following the holiday week, futures will once again take a broad market perspective with outside markets playing a large factor in trader involvement in the near future. Wednesday's slaughter is expected at 121,000 head.

Lean hog futures continue in a narrow trading pattern with prices hovering just above long-term support levels. Although there continues to be just enough underlying buyer support and market momentum to keep prices "technically" supported, the overall lack of fundamental support in the complex continues to create concern that prices levels may hover between the $45 to $50 per cwt price range through much of the summer. There will be increased attention on weekly hog weights, which will be released later in the morning. The steady drop in overall weights over the last couple of months continues to keep traders focusing on the potential that hog supplies are much more current than previously thought, although the realization that year-over-year hog number increases remains bearish to the market, and will likely depress price levels well into fall months. Cash hog values bounced higher, but the fact that the national average hog price remains below $30 per cwt, continues to create uncertainty about further market support. Cash hog prices are expected $1 lower to 50 cents higher with most bids expected steady. Slaughter Wednesday is expected at 469,000 head. Saturday runs are expected at 283,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle prices bounced higher in early week trade with live cattle prices in the South increasing $1 per cwt over last week's average, while Northern dressed trade posted a $3 to $6 per cwt bounce. The focus on firming cash values is helping to entertain the idea that cash values could be near seasonal lows.	1)	Firm pressure in nearby feeder cattle futures highlighted the continued concerns facing the cattle market going into late summer and early fall. With August feeder cattle backing away from previous gains, the concern is that last week's gains may establish firm resistance levels. These could hold through the upcoming weeks due to seasonal pressure in the market.
2)	Average cattle weights are starting to ease from recent highs. This is indicating that the market is becoming more current. Although weights are still well above year-ago levels, the trend for lower weights heading into the dead of summer is indicating that the market is moving in the right direction.	2)	Cash cattle prices continue to trade at a discount to the futures market. This relationship may continue through the end of the summer with the focus on the current backlog of cattle supplies likely to keep cash values under pressure in the coming weeks.
3)	Strong gains in cash hog values developed Tuesday, creating the potential for increased underlying support and further expectation that additional gains may develop in the near future. The strong discount in cash hog values to futures trade is showcasing the disconnect between cash markets and futures trade.	3)	Pork cutout values continue to show little support during early week trade. The lack of ability to elevate or even stabilize wholesale pork values is creating significant concern about demand for pork through the summer months.
4)	Further carcass weight reductions are expected in the weekly hog weight report released later Wednesday morning. This is expected to put more focus on the current ability for the industry to steadily and efficiently keep hog weights under control even though plant production levels were significantly reduced earlier this spring.	4)	Nearby lean hog futures continue to hover just above long-term support levels. The inability to distance prices from these levels continues to make renewed technical pressure a real possibility over the coming days and weeks.

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