DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $227.99 -$3.06*

Hogs: Steady Futures: Mixed Lean Equiv: $114.53 -$12.93**

* 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 cattle complex received a shot in the arm Tuesday due to lower grain futures and higher cash bids. There were some early sales about $1.00 higher in Texas, followed by some cattle trading $3.00 to $4.00 higher in Kansas. Cattle trading $1.00 higher was no real surprise, but bids and trades higher than that were. This was interesting considering July 4 is just 1 1/2 weeks away, a time of year after which beef demand seasonally decreases. However, current demand for beef remains strong and may not follow seasonality. Feedlots may be in a better position to negotiate higher prices with average weights indicating they are more current with supply. This is a change that has not been seen for a while. Boxed beef continued to plummet with choice cuts down $5.45 and select cuts down $1.71. The May Cold Storage report showed beef inventory decreased 8% from April and was 1% below May 2020. The Commitment of Traders report, that had been delayed one day, showed funds as net buyers of 10,633 futures contracts increasing their total net long positions to 63,573 contracts.

Hog futures put is a strong day early Tuesday with contracts nearly $3.00 higher but fell back into the close with the October contract closing slightly lower. This indicates how cautious traders are about the strength in cash as time moves forward. The National Direct Afternoon report did show price increased $4.47 which should alleviate some of the concern of traders. However, that was offset by the steep decline of $12.93 for cutouts. That is a huge decline and one that may be difficult to overcome anytime soon. The May Cold Storage report showed pork supplies 1% higher than April and down 1% from a year ago. Pork bellies have been substantially lower than a year ago and the month of May was no exception with stocks down 40% from last year. The Commitment of Traders report for the week ending June 15, showed funds as net buyers of 1,882 futures contracts, increasing their net-long position to 86,503.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded higher Tuesday with some reports of as much as $4.00 higher. This changes the market significantly as it put feedlots more in control.	1)	Boxed beef prices seem to be in a freefall with no end in sight. This may eventually affect the willingness of packers to pay higher.
2)	Futures are poised to retest the highs of last week and possibly move higher if beef demand remains strong during July.	2)	Beef demand may slow in July if seasonality prevails. Supplies may build, reducing prices further.
3)	Hogs were able to finally close higher after the freefall. Cash was higher, possibly indicating packers need to be more aggressive to keep demand satisfied.	3)	Hog futures just could not hold the strength they had early in the day, possibly indicating the market is not ready to move higher.
4)	The tightening supply of hogs in the country has not changed. This may become more acute as time moves forward.	4)	A record one-day decline of pork cutout price over the past nine years does not bode well for the market.

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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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