DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $203.28 +$2.26*

Hogs: Lower Futures: Mixed Lean Equiv: $131.78 +$1.48**

* 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:

Live cattle futures tried valiantly Wednesday to regain what was lost Tuesday, but to no avail. Cash did not provide any solid direction, but the few that did trade were $1.00 to $3.00 higher. Packers are reaping greater benefit from higher boxed beef prices but will be reluctant to pass this along by increasing their bids. Feedlots have been holding firm with higher asking prices, which they fully expect to get by the end of the week. There is some concern developing over the rise of COVID cases again and how that might impact demand. Some renewed restrictions may result in some impact on demand, but there is no indication of another economic shut down. Thus, this is something to think about, but not dwell on. Weekly export sales will be released Thursday morning, which may provide some initial market direction until there is more volume of cash cattle traded.

Hog futures traded lower much of Wednesday, remaining in a price range. However, near the close, substantial pressure came into the market, pushing the October contract limit down. USDA reported African swine fever was confirmed in the Dominican Republic. This may have been a knee-jerk reaction to this news, but it should not have an impact on the hog market in the U.S. However, the concern is that it is the first time it has been found in the Western Hemisphere. Pork and pork products have been not been allowed into the U.S. due to swine fever restrictions that have already been implemented some time ago. Cash prices continue to erode with the National Direct Afternoon report posting a decline of $1.74. However, cutouts increased $1.48, indicating continued strong demand. The weekly export report Thursday will be watched for any indication of renewed purchases from China.

	BULL SIDE		BEAR SIDE
1)	A few cattle were traded at higher cash Wednesday. This may set the bar for cash the rest of the week once greater activity develops.	1)	August live cattle futures already have higher cash factored in leaving little reason to push higher this week.
2)	The steady increase of boxed beef prices and somewhat smaller showlists may give feedlots the edge to obtain higher prices for their cattle.	2)	If weekly export sales are less than stellar, it may be difficult for futures to push higher.
3)	August hogs hold a substantial discount to the index with a little over two weeks remaining for the contract.	3)	The confirmed case of African swine fever in the Dominican Republic indicates it is the first time it has been reported in the Western Hemisphere and a closer threat to the U.S.
4)	The quick sell-off seen later Wednesday seems to be more of a knee-jerk reaction rather than from any solid evidence that African swine fever in the Dominican Republic is a threat in the U.S.	4)	If China is again not listed as a buyer on the weekly export sales report, futures may not be able to regain the losses of Wednesday anytime soon.

**

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.