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DTN Early Word Opening Livestock       06/17 06:19

   Limited Activity Sparks Additional Weakness  

   Firm pressure late last week in all livestock futures is likely to bring 
about follow-through selling Monday morning. The weaker tone in hog futures has 
traders searching for longer-term support levels.

By Rick Kment
DTN Analyst

Cattle: Steady              Futures: Mixed   Live Equiv: $143.34 -0.44* 
Hogs:   Steady to $1 Lower  Futures: Lower   Lean Equiv: $ 88.20 +0.18**
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue


   Cash cattle trade late last week appears to have been extremely light, which 
should leave packers extremely short-bought for this week. This is not new for 
most packers, as they seem to be able to maintain steady procurement levels 
even though negotiated trade numbers remain light. The lack of active trade 
last week could spark earlier movement this week as packers try to pull cattle 
forward through the last half of the month. That being said, most of the 
activity Monday is likely to be showlist distribution and inventory taking, 
with bids and asking prices undeveloped. Mixed trade is expected in live and 
feeder cattle futures early Monday morning following moderate to firm pressure 
through the end of last week. Traders will continue to focus on the direction 
of corn prices. Feed prices have the most direct impact on feeder cattle 
production costs as traders and buyers utilize break-even levels to estimate 
purchase prices of cattle moving to feedyards. The expectation that cattle 
supplies will continue to remain strong through the rest of the year is also 
adding underlying pressure to the entire complex.  

   Firm underlying pressure remains well rooted in lean hog futures trade 
following Friday's continued push lower which moved nearby contracts to 
three-month lows. The sharp, triple-digit market slide adds to the softness in 
the complex as traders continue to focus on demand uncertainty while domestic 
production remains active during the summer months. Even with continued 
production losses in China due to African swine fever, the fact that trade 
relations with China remain tenuous at best, and with no end in sight for the 
current trade war, the underlying tone of the market remains under pressure. 
Lack of support in hog futures remains and is expected to bring about a flurry 
of follow-through liquidation mixed with short-covering attempts during early 
week trade. Cash trade is called steady to $1 lower Monday morning with most 
bids steady. Expected slaughter Monday is 474,000 head. 

   BULL SIDE                              BEAR SIDE
1) Moderate to firm beef demand is     1) Softness late last week in cash
   expected to continue through the       cattle trade is causing additional
   next few weeks based on consumer       underlying concern through the entire
   buying patterns and improved           beef complex. This is adding to
   weather conditions. This is helping    concerns that seasonal highs may have
   build momentum through the complex     been hit during early June.
   into the Fourth of July Holiday
2) Nearby live cattle futures remain   2) Strong price pressure in choice beef
   well rooted above May support          cutout prices through the last two
   levels at $103 per cwt. The ability    weeks is eroding overall demand
   to hold these levels through the       support for the beef market. Even
   month of June should spark             though select cuts retain strong
   additional buyer support over the      buyer support, the inability to hold
   near future.                           price premiums on higher-priced meat
                                          cuts is causing concerns.
3) Sharp, late-week losses in lean hog 3) Triple-digit losses late last week
   futures are creating opportunities     pushed lean hog futures to
   for moderate to strong                 three-months lows. The underlying
   short-covering. This could help add    concern about strong domestic
   needed momentum, creating              production with no evidence of active
   underlying support levels.             increases of export trade, especially
                                          to China, is causing additional
                                          market weakness.
4) Nearby lean hog futures continue to 4) Softness in traditional summer pork
   hold a strong premium to               products such as rib cuts and bacon
   later-month contracts. This is         (belly cuts) is creating underlying
   putting increased emphasis on          pressure. The inability to maintain
   current domestic demand as well as     strong price levels in these cuts
   the potential to expand export         over the next couple of months is an
   trade through the upcoming months.     indicator of weakening overall
                                          domestic pork demand.

   Rick Kment can be reached


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