DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $212.12 +3.26*

Hogs: Steady Futures: Higher Lean Equiv: $134.48 -1.04**

* 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:

Cattle showed further strength Tuesday driven by the hopes that cash cattle will trade higher this week. Feedlots are offering upwards to $2.00 higher in the anticipation that soaring boxed beef prices will bring packers to the table more aggressively. Cattle trade may not develop until later in the week as packers may want to wait it out. Strong futures gains Tuesday may influence packers to some degree as they determine what type of leverage they may have going forward. Marketings are current and the continued increase of boxed beef prices may result in higher bids and higher trade. Boxed beef jumped $4.84 for choice cuts and $4.11 for select cuts. Demand looks favorable heading into Labor Day.

The National Direct Afternoon hog report showed price down $0.60 as packers were able to obtain the hogs they needed without increasing bids. Cutouts also lost ground declining $1.04 with a huge loss in hams of $18.74. Yet, futures overcame that underlying bearishness to rally further as traders stepped back into the market after the liquidation last week. Traders seem optimistic that lower prices are a buying opportunity as the outlook is for tighter supplies as the year progresses. Trading in futures may develop slowly Wednesday but follow-though buying is expected.

	BULL SIDE		BEAR SIDE
1)	Cattle futures were able to push higher supported by lower grain prices and the potential for higher cash to develop.	1)	Cattle futures rallied in anticipation of higher cash, but that may be it as higher cash has now been factored in, leaving limited upside potential.
2)	Cattle weights are steady indicating feedlots are current. This provides the ability to hold out in anticipation of high cash.	2)	It may be difficult for futures to break out of the sideways trend as strong boxed beef prices may be limited to Labor Day demand.
3)	The sharp decline of hog futures last week provided the opportunity for traders to increase their long positions for anticipated higher prices.	3)	The strong two-day rally of hog futures may be difficult to extend with lower cash and lower cutouts.
4)	August hogs will go off the board next week Friday with October still holding a huge discount to cash. It will need to converge as a decline of that magnitude unlikely.	4)	Packers seem to be able to obtain the hogs they need without much difficulty leaving limited upside potential for futures prices.

**

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.