DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $215.48 +1.62*

Hogs: Steady Futures: Mixed Lean Equiv: $114.79 -2.47**

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

(The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)

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

GENERAL COMMENTS:

Cattle futures tried to push higher again Wednesday, but just could not hold even though grain futures fell. There is further disappointment setting up for cash cattle as feedlots are struggling with higher feed prices. Sellers are anxious to move cattle and lower futures have increased the possibility of lower prices in the weeks to come. With more interest in selling cattle, packers are able to procure supply ahead of time without being forced to bid higher. Boxed beef prices were mixed, which did not help matters. It seems like the futures charts indicate a sideways trading pattern developing, which may be around for a little while. Futures are oversold technically, but that may not matter through the rest of the week as cash is likely not going to get any better.

Hogs have been the poster child of the livestock complex as the drop in futures about three weeks ago has been erased with July and later contracts posting new highs. The issue is that the market is becoming choppy, which could indicate it may be running out of steam. However, continued tightening hog supplies could keep more support under the market than what is already anticipated. Futures may be near technical resistance, which may be difficult to breach, but fundamentals will always rule. Weekly export sales will be watched for any weakness in sales. Saturday slaughter is projected at 51,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures seems to be building a level of price support over the past few days possibly limiting further downside. Demand for beef remains strong, which should support boxed beef.	1)	Traders seem to have lost interest in buying this break. Cash cattle do not give the indication of any price rally anytime soon as long as grain prices remain high. Feedlots will want to move cattle.
2)	Futures are oversold and ready for a bounce. A better sales export report could trigger some buying interest.	2)	Packers are able to purchase cattle without difficulty and are purchasing supply in advance. This eliminates the need for them to be aggressive.
3)	July and later lean hog futures made news highs with June almost there. A positive Exports Sales report to push June to regain all of its losses and join the others in the uptrend.	3)	June and July left a gap in the price charts Wednesday, which will need to be filled.
4)	Projected hog slaughter for Saturday shows another reduction, which indicates supplies continue to tighten. Higher feed prices may limit greater pork production in the future, keeping supplies tight.	4)	Weekly export sales will need to be better than last week or traders may sell futures more aggressively pushing prices lower.

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For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com

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