DTN Early Word Livestock Comments

Mixed Trading Activity Before the Holiday

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst

Cattle: Steady Futures: Mixed Live Equiv: $211.30 -1.28*

Hogs: Lower Futures: Mixed Lean Equiv: $120.66 +0.06**

* 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:

Cash prices did not change Thursday trading similar to what they had done earlier in the week. Trade in the South was steady to $2.00 lower while sales in the North averaged $1.00 higher. Most of the cash activity may be finished for the week. The same is probably true for futures as traders may not have much interest in being very active prior to the holiday weekend. Boxed beef prices continue to plummet with choice cuts down $3.64 and select cuts down $2.34. Boxed beef prices have fallen to the lowest level they have been since late April. The steep decline has not yet had any real impact on cash cattle other than limiting upside potential. Export sales were not very good with sales down 28% from the previous week and down 17% for the four-week average. Markets will be closed on Monday for an extended holiday weekend.

Hog futures were on a roller coaster Thursday with substantial early strength fading rapidly as the day progresses. Futures ending the day with triple-digit losses after posting price swings of $4.50 to $5.00. Early strength likely stemmed from good exports sales of 28,600 metric tons, holding steady with the previous week, but up 12% from the four-week average. China was listed fifth in the line of buyers. However, that quickly faded as it was seen packers were not interested in bidding higher for supply. Cash fell $4.37 on the National Direct Afternoon report. Cutouts Thursday provided no support to the market with an increase of only $0.06. Saturday slaughter is estimated at 13,000 head.

BULL SIDE BEAR SIDE
1)

Cattle futures have settled into a sideways trading pattern with prices trying to reach back to the highs of a few weeks ago.

1) Export sales were not very good. That, coupled along with generally slowing beef demand after July Fourth, may back up beef into the market.
2) The grain market seems to have adjusted to the recent bullish acreage number and quarterly stocks and may chop around for a while as the focus is back on weather. This may keep pressure off cattle futures. 2)

Packers may not be willing to bid higher in the cash market due to the severe decline being seen in boxed beef prices.

3)

Good exports sales with China still buying, should provide support as pork supply may not back up in the domestic market.

3) Hogs continue to struggle with the market unable to establish a higher trend.
4) The mandate for slower chain speed and a tightening supply of hogs may eventually have a bullish impact on the market as strong consumer demand may see less availability and higher prices. 4) Packers seem to have virtually shut down for the week and may remain unaggressive in the cash market Friday.

**

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

Robin Schmahl