DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $194.69 +$0.61*

Hogs: Steady Futures: Mixed Lean Equiv: $110.88 -$0.15**

*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:

Most of the cash business has been done for the week at $2.00 lower. Traders are somewhat concerned over next week as packers again may not need to be aggressive due to a number of cattle already contracted. The other concern is a rising fear over a recession and the impact it would have on beef demand. Cattle futures may not see much volatility Friday as the Cattle on Feed report will be released after the close. Estimates for the report are for on feed at 101.4%, placements at 96.1% and marketings at 98%. Weekly export sales of 23,300 metric tons (mt) were 18% below the previous week. Boxed beef showed gains with choice up $1.23 and select up $0.04. Feeder cattle continue to struggle with steers and heifers being sold at lower prices. New contract low closes even in the face of weaker corn prices do not bode well for the market.

Hog futures back pedaled a bit Thursday as the exuberance of the previous trading sessions ran its course. Both cash and cutouts were lower. It was not a surprise cash was lower with the National Direct Afternoon Hog report showing a decline of $1.18. It was a bit disappointing to see cutouts slipping back $0.15. Export sales were neutral at 24,100 mt. The positive aspect was China being the fourth largest buyer. Saturday slaughter is estimated at 58,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures might bounce Friday as traders position themselves ahead of the Cattle on Feed report.	1)	Live cattle have not been able to rally due to cash weakness and feeder cattle have not been able to rally even though corn futures have declined. This does not provide support to the market.
2)	Cattle futures are oversold with traders unwilling to press the market lower ahead of the report Friday afternoon.	2)	The upcoming Cattle on Feed report could have futures trade in a tight range Friday with little incentive for traders to guess the numbers due to the surprise on the last report.
3)	The minor decline of pork cutouts Thursday did not turn the market bearish. It seems support has been uncovered, providing confidence for traders to buy into the market.	3)	Rising concern over a recession may limit the potential of pork demand if it comes to fruition as it may have an impact on demand.
4)	Lower hog weights and increasing seasonal demand should support the market and a further retracement of futures.	4)	June and July hog futures have a chart gap below the market that may be filled at some point.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. 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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