DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Mixed Live Equiv $133.13 -0.89*

Hogs: Steady Futures: Mixed Lean Equiv $ 72.05 +4.56**

* 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 continues to slowly but steadily develop through the week with live prices in the South seen mostly $95 per cwt. This is the same trading range as seen earlier in the week but does point to firming support from last week at $1 per cwt above last week's average. Dressed trade is $155 to $160 per cwt, generally steady to $2 per cwt lower than early week trade, but $1 to $6 per cwt higher than last week. It appears that as more volume develops during early July, cash trading ranges are moving back to a more normal level. The break away from the $15 to $25 per cwt price ranges the last few weeks is not a bad thing at all as it will help to create needed consistency to the market and hopefully help spark some market firmness through the rest of July. Given that cattle supplies remain abundant and overall beef demand will likely follow weak summer patterns, cash cattle trade could continue to trade at a discount to the futures market until well into fall. Futures trade is expected mixed in a narrow-to-moderate range. The lack of support during the week is not a significant surprise, but the inability for deferred contracts to show more support is creating concerns that a fall and winter rally may not be significant despite the expected tight supply of cattle. Traders are looking for some late-week stability, but morning trade is expected to be filled with a combination of limited follow-through selling and short-covering driven by activity in nearby contracts. Thursday's slaughter is expected at 121,000 head.

Wholesale pork values surged higher Wednesday afternoon, although this support is expected to have little short-term impact in the direction of lean hog futures trade. Mixed market moves are expected to once again develop Thursday as traders look for increased direction from the weekly Export Sales and Shipments report released later in the morning. The focus in pork sales and shipments will be on China activity last week. Although there seems to be little indication there will be any significant changes in overall trade volume, or specific trade to China, there is always hope that a bullish surprise is just around the corner. August futures have dipped below $48 per cwt Wednesday. This is significant because it sparks technical pressure once again with prices setting contract lows. The inability to hold support levels above the $48.12 June low is putting even more focus on the inability to actively move pork product through the system while hog supplies remain burdensome. This makes the most recent price divergence between wholesale pork prices and the futures market even more intriguing and could add more volatility to the currently weak market structure. Cash hog prices are expected $1 lower to 50 cents higher with most bids expected steady. Slaughter Thursday is expected at 468,000 head. Saturday runs are expected at 283,000 head.

	BULL SIDE		BEAR SIDE
1)	Firming cash cattle trade during the week with prices $1 to $6 per cwt higher than last week's average is bringing stability to the market, pointing to what could be seasonal lows during the first week in July.	1)	Feeder cattle futures remain under light-to-moderate pressure with prices stuck in the current market range as traders move closer to long-term support levels in the complex. The lack of price premium in nearby and deferred contracts is also adding concern that longer-term support may remain elusive during 2021.
2)	Wide premiums remain in deferred live cattle futures spring 2021 contracts trading at a $11 to $13 per cwt premium of spot trade. The focus on expected tight cattle supplies in the coming months could point to even more buyer support.	2)	Cattle futures remain stuck in a sideways pattern, which is limiting market enthusiasm from all levels. This could allow markets to continue to wander with limited direction with spot month contracts bouncing above and below the $100 per cwt mark with little underlying direction.
3)	Pork cutout values surged higher in moderate-to-active trade midweek. This support in wholesale values is well received, with the expectation that firming consumer demand may becoming more consistent through the month of July.	3)	Despite the bounce higher in pork values, the ability for packers to easily gain access to additional hog numbers at lower prices continues to erode cash values and limit the potential for active buyer interest to move into futures trade.
4)	Hog weights continue to swiftly erode lower with last week's average hog weight falling 1.5 pounds from the previous week at 283 pounds per hog. Although current weights are still 3.2 pounds above last year, the pullback of 12-plus pound per head from recent seasonal highs is cutting into the availability of pork in the system.	4)	Limited new export sales to China in the upcoming morning report is likely to create follow-through pressure through lean hog futures. The continued concern that exports will not be able to live up to early-year expectations will continue to put pressure on the pork complex.

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