DTN Early Word Livestock Comments

Cattle: Steady to Higher Futures: Mixed Live Equiv $133.02 +0.71*

Hogs: Lower Futures: Mixed Lean Equiv $ 75.88 +3.76**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

General Comments:

Although cash cattle trade remains light to moderate, the higher prices are a relief and point to increased optimism as more cattle are likely to be sold at the higher levels before the end of the week. Southern sales at $100 to $101 developed Thursday. This is generally $1 per cwt higher than the previous day, and now has increased prices $3 to $4 per cwt from last week's levels. Dressed trade in the north was posted in a wide range from $163 to $168 per cwt with most trade at $163 per cwt, moving prices generally $3 per cwt higher late last week's Nebraska average. Although it is too early to determine the weekly average prices at this point, these price gains may be enough to move the average above $100 per cwt and create some additional market support through the rest of August. Thursday's slaughter is expected at 118,000 head. Futures trade are mixed following a moderate-to-firm pullback in live cattle and feeder cattle trade Thursday. The optimism in live cattle trade early in the week is fading slightly, although most of the gains are being held intact as traders are keeping markets within the top end of the recent trading range. The focus at the end of the week will be the direction and sustaining previous gains in feeder cattle trade. With corn prices expected to stabilize Friday, the underlying buyer support based on lower feed costs and falling production costs seem to be quickly backing away from the market. But traders remain focused on the potential to establish firming price support in live cattle trade near the $107 per cwt levels in actively traded October contracts, looking for limited but supporting market moves as the month of August continues.

Limited changes have developed in lean hog futures trade as most trade interest has focused on the cattle complex, which has shown more active price direction and interest during early August. Mixed prices are expected to once again develop across most of the lean hog contracts with nearby futures still hovering just below the $50 per cwt trading level. With prices in this level, markets remain above support levels, but have been unable to spark any sense of market support or excitement to break away from the bottom end of the trading range. The inability of August and October futures to move above $50 per cwt in the near future will continue to erode market optimism as traders focus on the uncertainty of pork demand growth through the near future while hog and pork supplies remain elevated. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents lower. Slaughter Friday is expected at 472,000 head. Saturday runs are expected at 225,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle prices continue to shift higher on a daily basis through the week with Southern live trade moving as high as $101 per cwt heading into Friday morning. This should push price levels $3 to $4 per cwt higher than last week, narrowing the discount to futures trade and pointing to renewed optimism through the fall months.	1)	Feeder cattle futures backed away from recent gains through the end of the week, allowing for additional market pressure to potentially develop. A break away from early week gains could spark follow-through position taking, limiting overall market optimism in all cattle trade.
2)	Live cattle futures continue to trade near five-month highs with October futures prices holding near $107 per cwt. The ability to maintain price levels within this trading range is expected to spark follow-through commercial buying over the coming days.	2)	Beef demand concerns continue to remain strong as the unknown status of school systems returning in the coming weeks, and questions if these plans to return to the classroom will be sustained if COVID case numbers continue to rise. This will impact beef demand from a school lunch perspective, potentially creating additional volatility in the market.
3)	Strong gains in pork cutout values once again developed Thursday. This is pointing to the ability to actively and aggressively move pork supplies despite the lower lean hog values during August.	3)	Continued pressure in nearby lean hog futures is putting more focus on resistance levels at or near $50 per cwt. This continues to add underlying weakness to the entire hog complex, which may continue through the month of August.
4)	Lean hog futures remain oversold as nearby contracts inch closer to long-term lows once again. Consistent support in cash hog values and pork cutout prices could quickly bring active buyers back into the market with nearby contracts able to move significantly higher before experiencing significant resistance levels.	4)	Further pressure in cash hog values has quickly limited market optimism following last week's shift higher. This is moving the national average price well below $40 per cwt once again, causing concerns that further pressure may develop in the coming days.

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

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