DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $259.76 -1.83*

Hogs: Steady Futures: Higher Lean Equiv: $117.37 -6.87**

* 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 showed spillover pressure from the weakness of the August contract that will cease trading Tuesday. October will then move to front month and is holding a premium to cash. Unless cattle supplies tighten and demand remains strong, some premium might erode out of the market over time. Although the report a week ago showed a trend of lower cattle supplies, traders seem convinced demand will slow, and beef supply will be sufficient. Packers have not been very anxious to pay more for cattle despite high boxed beef prices. Now that boxed beef is declining, it may be more difficult to see higher cash. Choice cuts fell $2.56 with select cuts down $2.97. The prospect of higher cash may be dimmed due to the upcoming holiday weekend. The Commitment of Traders report showed funds were net buyers of 21,876 futures contracts moving their net-long positions to 92,649 contracts.

It was not surprising to see hogs lower Monday, but that was not before they opened higher on follow through from the strength on Friday. Traders received more of a sense of the market as the morning progressed and it did not look very supportive. The National Direct Afternoon report showed price down $1.82. Along with that, cutouts fell $6.87. That took away both fundamental and technical support. Yet even with that, futures held well. With the upcoming holiday weekend, packers are not likely to be aggressive in the cash market. The Commitment of Traders report showed funds as net buyers of 2,187 futures contract bringing their net-long positions to 79,207.

	BULL SIDE		BEAR SIDE
1)	August live cattle futures cease trading Tuesday, which may relieve some spillover pressure on the rest of the complex.	1)	Cattle have more than eliminated the gains seen from the positive numbers on the Cattle of Feed report. Traders are not convinced tighter numbers may be an issue as demand slows.
2)	Cattle supplies are expected to tighten as the year progresses, leaving packers no choice but to increase bids to obtain the required tonnage to meet demand.	2)	October cattle futures are now back down into the range they have been in since mid-June, indicating traders feel the current premium may be as good as it gets.
3)	Hog futures established higher highs before selling pressure unfolded. The decline Monday might trigger more buying interest from traders as they position themselves for the long haul.	3)	Lower cash and falling cutouts do not bode well for hog futures. Support will need to develop soon, or futures will fall back.
4)	Weaker cash and lower cutouts may be a temporary result of the holiday weekend. Prices may rebound as the market looks ahead to upcoming supply and demand.	4)	The upcoming holiday will leave the market somewhat lethargic and packers less aggressive as plants will be processing less. .

**

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.