DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $244.70 +0.41*

Hogs: Higher Futures: Higher Lean Equiv: $141.10 -0.56**

* 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:

The trading range of live cattle Wednesday was only about $1.00, which is somewhat unusual compared to the volatility we have been experiencing. At least nearby futures were able to close higher. Feeder cattle were again under pressure due to higher corn prices. Some cattle were traded at steady cash Wednesday, but again there was no large movement. Feedlots would like to see higher cash, but the stage has been set for the week as slaughter was revised lower and packers were able to purchases sufficient supply at steady prices. After two days of lower boxed beef prices, providing concern that prices may have topped, boxed beef moved higher Wednesday. The increase of choice cuts was only $0.04 while the increase for select cuts was $1.69. Weekly export sales will be released Thursday morning. Some concern has risen over the slowing of imports by China. During the month of May, they imported 789,000 metric tons of beef compared to 922,000 in April.

Front-month June hogs and then December and later futures posted new contract highs Wednesday. The rise of hogs has been relentless as strong demand requires packers to search for supply and pay more for them. The National Direct Afternoon report showed cash up $2.66 Wednesday. It was thought at the beginning of the week that packers might be a little hesitant to pay more money, but that certainly has not been the case. Higher cash was not supported by higher cutouts as they declined $0.56. Even with the potential for tighter supply down the road, slaughter levels are running strong. Weekly exports sales will be released Thursday morning. Saturday hog slaughter is estimated at 55,000 head. A couple JBS plants are trying to make up for the brief downtime due to the cyberattack.

	BULL SIDE		BEAR SIDE
1)	Boxed beef showed higher price again, which may indicate demand could remain stronger than anticipated seasonally.	1)	Cattle futures are having a difficult time finding strong buyer interest. Traders remain hesitant to increase their long positions and have actually been steadily reducing those positions.
2)	Cash cattle continues to trade no worse than steady, which is not what is desired, but better than the alternative.	2)	Packers have been able to purchase cash without much difficulty at steady cash so far this week. That is likely not going to change the rest of the week.
3)	Some hog contracts continue to make new highs, keeping the uptrend solidly intact.	3)	If China is not a major buyer on the weekly export sales report or lower overall sales, traders could liquidate some long positions, putting pressure on the market.
4)	Packers remain aggressive and are ready and willing to pay more to keep plants running full and demand satisfied.	4)

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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

(c) Copyright 2021 DTN, LLC. All rights reserved.