DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv $133.19 +0.33*

Hogs: Steady Futures: Mixed Lean Equiv $ 73.81 +1.80**

* 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 be slow to develop early in the week as traders look for the mandatory report Monday morning in order to get a good indication of negotiated trade numbers last week and average trade levels. It is expected that live trade will be pegged between $94 and $95 per cwt, but the ability to post steady-to-higher cash values from the previous week may be the boost the cash cattle market has needed during a lackluster month of July. Showlist distribution and inventory taking is likely to be the main focus Monday morning, although both sides continue to focus on continued strong production levels and questions about overall demand growth through the end of the summer. With all nearby live cattle futures trading above $100 per cwt going into the week, the focus on maintaining last week's price support will take precedent through most of the morning. The $100 per cwt threshold seems to be more of a psychological point than technical of fundamental benchmark, but the ability to continue to spark even limited buyer activity in order to keep prices above this level will likely set the tone for the week. Feeder cattle futures posted strong triple-digit gains, moving August futures well above $135 per cwt and continues to test short-term resistance levels of $136.15 per cwt. A sustained move above these levels is likely to rekindle long-term support through the complex, although the continued uncertainty of long-term demand may still keep upward price levels well contained. Monday's slaughter is expected at 121,000 head.

Mixed trade is expected to slowly develop Monday morning as traders continue to hold prices in the lower end of the trading range but hovering just above long-term support levels in order to not spark any significant technical selling. August futures closed at $49.87 per cwt Friday. With prices flirting with the $50 per cwt price level, there continues to be some underlying focus on renewed bullish market support, even though additional short-term gains will be curbed by continued growth in pork production and the amount of market-ready hogs available to packers. Increased packing capacity continues to develop, which has the potential to push daily slaughter rates near 475,000 head once again. At these levels, combined with strong Saturday runs, overall movement of hogs through the system should be approaching pre-COVID levels. The ability to maintain these levels through the rest of the summer months as overall COVID cases continue to spike will be closely monitored and will likely have a significant impact in the future direction of market prices. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Monday is expected at 474,000 head.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures pushed higher Friday with August futures closing at $100 per cwt. The ability to hold prices at or above these levels is expected to create underlying market support, helping to spark renewed buying.	1)	Cash cattle prices continue to be at a discount to the futures trade through the month of July. This is putting even more emphasis on the backlog of cattle available in the system and concerns that supplies may remain abundant through the end of the year.
2)	Continued strong cattle slaughter rates continues with weekly slaughter inching above year-ago levels. This is expected to help work through the continued backlog of cattle available on the market, which built up through the last four months.	2)	Limited long-term support in feeder cattle futures points to readily available cattle numbers moving into feedlots for the next several months. This could continue to keep prices subdued through the end of the year and well into early 2021.
3)	Firm gains in pork cutout values late last week is helping to spark renewed focus on the ability to move additional pork supplies and hopefully set a market bottom during early July.	3)	Despite the growing slaughter numbers, cash hog prices continue to be limited as packers have access to large numbers of market-ready hogs and are unwilling and unable to boost negotiated prices at this point.
4)	Daily hog slaughter levels are expected to near 475,000 head per day during the week. This would be a significant threshold if these levels can be continued through the week, helping to indicate more normalcy moving back into the industry.	4)	Lean hog futures remain technically weak with prices hoovering just below $50 per cwt. The inability to move away from long-term contract lows despite the recent stability in pork values may limit upward market moves during the rest of July.

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