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DTN Early Word Opening Livestock       08/19 05:58

   Spillover Weakness Expected Monday Morning  

   Sharp lean hog losses Friday will weaken market direction early Monday 
morning, although a combination of short-covering and follow-through selling is 

By Rick Kment
DTN Analyst

Cattle: Lower   Futures: Mixed   Live Equiv: $153.27 +1.63* 
Hogs:   Lower   Futures: Lower   Lean Equiv: $ 91.12 -1.97**
*   based on formula estimating live cattle equivalent of gross packer revenue 
** based on formula estimating lean hog equivalent of gross packer revenue


   Given the continued bearish market direction in cattle trade, cash cattle 
interest is expected to remain at a standstill through the first couple of days 
this week. Showlist distribution and inventory taking is likely to be the 
extent of any cash market information seen during the week. Now that we have a 
complete week in the books following the Tyson plant fire, it will be 
interesting to monitor and watch daily slaughter numbers. I would expect that 
overall numbers would be steady to higher than last week's levels, which may 
eliminate some of the overall pressure from causal market watchers and some 
noncommercial traders. Especially since "year-ago slaughter numbers" give us a 
less complete picture due to the overall changes in market structure over the 
last year. Firm pressure last week has caused live cattle and feeder cattle to 
remain generally oversold. This is expected to spark additional potential for 
moderate-to-firm gains through the week, although the renewed bearishness in 
hog trade is likely to limit upward movement. 

   Sharp limit losses in spot October lean hog futures sparked additional 
technical pressure in the complex. This not only moved prices to year-long lows 
in October contracts, but opened the door for additional technical selling over 
the near future. Long-term support remains near $58 per cwt, which is still 
another $4 per cwt lower than current levels, but with expanded limits 
available and continued concerns of weak pork demand and uncertain trade issues 
with China, losses like this are reachable. The lean hog futures complex is 
could expand the discount to cash values, likely adding additional fundamental 
pressure to the complex. Cash bids are expected steady to $3 lower with most 
bids $1 lower. Expected slaughter Monday is at 474,000 head. 

   BULL SIDE                              BEAR SIDE
1) Given the active Saturday plant     1) Continued pressure in live cattle and
   runs, beef packers increased plant     feeder cattle trade has limited
   output from week-ago levels even       additional buyers moving back into
   without the Kansas Tyson plant. An     the complex. The underlying pressure
   estimated 7,000 head increase from     may spark additional market weakness,
   week-ago levels should help to keep    holding nearby contracts under $100
   cattle supplies current despite the    per cwt.
   limited plant space.

2) Sharp triple-digit gains continue   2) Renewed buyer support quickly
   to develop in boxed beef values.       developed in corn trade late last
   Continued concern about packer         week. The focus is moving away from
   capacity is sparking underlying        USDA's latest crop projection levels
   wholesale buying, which is quickly     and onto other sources such as the
   improving packer margins.              DTN/Progressive Farmer 2019 Digital
                                          Yield Tour last week and other
                                          on-the-ground surveys over the near

3) There is limited pressure in        3) Late-day pressure flooded lean hog
   deferred lean hog futures trade.       futures Friday. Sending October
   June contracts currently hold a $21    futures limit lower as renewed
   per cwt premium to spot contracts,     technical pressure quickly
   allowing not only long-term support    redeveloped. This may create
   but potential to remain in the         additional long-term weakness in the
   complex long term.                     complex as traders struggle to find
                                          technical or fundamental support in
                                          the near future.

4) Firm cash hog markets have put the  4) Wholesale pork prices have been
   focus on the need and ability of       unable to show significant
   packers to aggressively source hogs    improvement or even signs of life the
   in order to meet daily plant           last few days. This may add even more
   requirements. This is helping to       uncertainty to the complex as trade
   maintain an aggressive premium over    and recession concerns continue to
   futures trade, and may help to         grow.
   stabilize the complex.

   Rick Kment can be reached at


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