DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv $134.62 +1.11*

Hogs: Higher Futures: Higher Lean Equiv $ 75.16 -1.86**

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

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

General Comments:

Firm asking prices on Monday in the North has established expectations from feeders that higher prices are expected as the week continues. Asking prices have not yet been established, but given the $3 per cwt rally in cash cattle trade last week, and underlying firmness in futures and beef values, the expectation of additional price firmness is widespread. Asking prices Monday in the North are seen at $168 dressed and $107 live, as showlists appear to be lower in most regions. The focus on continued strong packer interest and lighter cattle offered for sale following the active cash trade last week is sparking underlying movement. The upside market movement over the last several weeks still creates some caution through the complex as cash basis levels remain seasonally weak going into the fall months. But the upcoming Labor Day holiday and expectations that school reopening's will spark additional beef demand is driving additional buyer support in all markets could limit market weakness over the near future. Futures trade is expected firm, although the potential for early mixed trade as traders try to adjust positions surrounding the renewed technical and fundamental support moving into the market could spark some choppy shifts early Tuesday. Nearby live cattle contracts continue to be at or near short-term resistance levels, with the potential to set new multi-month highs in the coming days based on the underlying support in cash and boxed beef values.

Active gains have quickly moved back into the lean hog futures complex as technical buyer support has sparked renewed upward movement in all nearby contracts. Deferred futures remain sluggish and resistant to break away from previous price patterns, but the ability to break out of the shadows the past two weeks has allowed for increased market momentum in August through December contracts. It is expected that follow-through technical support is likely to be in August and October futures with prices moving above $53 per cwt. This puts the target at or above the $55 per cwt resistance levels, which at this point, remains achievable. But the continued weakness in market fundamentals given eroding pork values and continued large numbers of market-ready hogs may keep prices from moving aggressively above the $55 per cwt level. The breakout moves from $50 per cwt has been a significant signal during early August, creating the potential that long-term support levels may finally have been well established as traders look forward to pork demand growth through the end of the year. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Tuesday is expected at 478,000 head. Saturday runs are expected at 190,000 head.

	BULL SIDE		BEAR SIDE
1)	Active cash cattle gains last week sparked renewed interest through the entire cattle complex. This has created increased asking prices and raised the expectations of further price support during the rest of August.	1)	Continued concerns of economic strength due to the COVID-19 pandemic and changes to fall college sport schedules could significantly, negatively impact beef demand over the coming weeks, based on limited travel activity, reduced gatherings and lack of tailgating.
2)	Firm gains in choice and select beef cuts Monday helped to spark renewed cutout values and expectations that demand growth is quickly developing ahead of the Labor Day Holiday. This could spark renewed interest over the next couple of weeks in futures and cash markets.	2)	Seasonal market trends in feeder cattle futures could limit aggressive further price support, which could allow for nearby futures prices to struggle to move above $145 to $148 per cwt in the near future.
3)	Firm cash hog gains have redeveloped early in the week following growing uncertainty as prices have been contained in a narrow but weaker pattern last week. This could add follow-through support as the week continues.	3)	Sharp triple-digit pressure in pork cutout values created a stark realization of just how weak pork market fundamentals remain despite active futures gains. This could create uncertainty as fundamental and technical factors remain at odds with each other through early August.
4)	Aggressive triple-digit gains in nearby lean hog futures has not only sparked active price support, but the moves have created awareness and interest by noncommercial traders who appear willing to quickly jump back into the hog market, which is signaling a move away from long-term support levels.	4)	Aggressive nearby gains in lean hog futures has pushed prices sharply higher. This also opens the door for markets to quickly reverse course if buyer support dries up in the next couple of days. Increasing volatility to the already unsettled lean hog market could add to wide market swings in either direction over the coming weeks.

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

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