DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $207.15 -1.87*

Hogs: Steady Futures: Mixed Lean Equiv: $123.55 +1.15**

* 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 market was not kind to the cattle complex Thursday with triple-digit losses across all contracts. It is likely the weakness of live cattle that pulled feeder cattle lower. Continued weakness of corn futures generally might have supported feeders, but that was not the case. Live futures broke below the sideways range they had been in, which may have triggered sell stops, exaggerating the weakness. However, cash did not perform well this week, adding to the pressure. Texas cattle traded at an average of $120 with Nebraska averaging $125. Kansas ranged from $119 to $122 averaging $120. These were steady to slightly lower than last week. That put the pressure on August futures. Packers were able to purchase cattle ahead for the resumption of regular slaughtering schedules. Boxed beef continues to plummet with choice cuts down $2.93 and select cuts falling $2.20. Weekly export sales are not expected to be very supportive to the market Friday.

Hog futures were able to hold their own despite the weakness of cattle and selling in other outside markets. That certainly was positive due to further weakness on the National Direct Afternoon report with cash down $1.09. However, that was offset to some extent by cutouts posting a gain of $1.15. Front-month July futures continues to slowly creep higher with just four days reaming for the contract. Hopefully, the large discount of the August contract will push the market higher; that is if cash can stabilize. Delayed weekly export sales might be a factor in price strength or weakness Friday. Saturday slaughter is estimated at 57,000 head.

	BULL SIDE		BEAR SIDE
1)	There is no backup of cattle in feedlots as they remain current with marketings.	1)	Cattle futures broke below technical support Thursday after consolidating for a few weeks. This could trigger further selling.
2)	Lower boxed beef prices should keep demand strong as beef will continue to move through retail outlets. Lower prices should stimulate demand.	2)	Packers were able to purchase a substantial amount of cattle, which may leave them less aggressive next week especially in light of declining boxed beef prices.
3)	Hog futures were able to hold Thursday and seem to be trying to build a base of support.	3)	Hog futures could not hold the uptrend last week and now seemed poised to test the lows again.
4)	Strong export sales could generate greater buying interest by traders especially if China remains a good buyer.	4)	Weekly export sales could show that China is slowly reducing their imports of pork. This would solidify the information that their internal hog herd is increasing requiring less imports.

**

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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