DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $232.33 -2.09*

Hogs: Steady Futures: Higher Lean Equiv: $127.35 -4.20**

* 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:

Last week certainly was a wild week with some influence stemming from movement of grain prices, but generally the volatility came from cash and demand. Cash was positive for cattle with prices in the North averaging $4.00 higher than the previous week while cash in the South was $2.00 higher. This was not anticipated by most of the trade early in the week as boxed beef showed weakness. Boxed beef continued to weaken substantially throughout the week, but it had little or no influence on cash. Boxed beef on Friday fell $2.97 for choice cuts and $3.63 for select cuts. For the week choice fell $8.61 while select fell $15.26. It may be a tall order to expect higher cash this week, but anything is possible due to continued strong demand and the fact that the cattle industry is being looked at this week by the Senate Ag Committee to address the price disparities.

Hogs did not fare well last week. In fact, it was downright brutal. Futures were riddled with long liquidation that just could not stop as sell stop orders were continually triggered as price plummeted lower. There was a lot of spread trading on Friday as traders sold July and August nearby and bought later months. Packers pulled way back earlier in the week due to weakness of futures but were able to procure the hogs they needed to keep aggressive chain speed filled. Cutouts fell on Friday, posting a decline of $4.18. Some pork products plummeted with butts down $21.23 and pork ribs down $10.75, adding to the negativity. Traders will be cautious as the week begins.

	BULL SIDE		BEAR SIDE
1)	Cattle futures were able to close higher for the week supported by higher cash and weaker grain prices. The same could unfold this week.	1)	Plummeting boxed beef may indicate demand is slowing or beef is backing up in the market. This may influence the willingness of packers to bid higher.
2)	Boxed beef made a huge correction, but cash still traded higher. Packers may not dare pull back on cash due to the Senate Ag Committee meeting this week over the pricing situation of the industry.	2)	Beef exports seem to be slowing, which could put more beef on the domestic market that will need to be absorbed.
3)	Hog futures may have overcorrected to the downside and may be ready for a bounce.	3)	Hog prices may have moved too high, too fast and the market is correcting. The correction may not yet be completed despite the bounce of deferred futures contracts on Friday.
4)	Futures now have price gaps above the current market in many contracts that will likely be filled.	4)	Trader may not be very willing to buy the break as there has been significant weakness of cash and cutouts.

**

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

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