DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $198.13 -$0.01*

Hogs: Higher Futures: Higher Lean Equiv: $117.67 +$2.31**

*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:

June live cattle seemed to think it was time to narrow the gap between futures and cash. The light trade that developed Wednesday points to lower cash this week but even lower cash leaves futures at a discount. However, lower corn prices may provide feedlots with some bargaining power as cattle ready for marketing seem to be current. Cash trading activity is expected to increase Thursday. Boxed beef prices did not provide much support with choice down $0.12 and select up $0.26. Boxed beef price may continue in somewhat of a sideways range as inflation impacts consumer spending. Weekly export sales will be delayed until Friday due to the holiday on Monday.

Hogs did an about-face Wednesday, quickly closing the chart gaps left on Tuesday. July futures far outpaced the June contract as traders seem to think it has more potential due to having a longer duration of time remaining for the contract. June has only about two weeks remaining, leaving it closer in line with cash. The strength of cash and cutouts, with further strength Wednesday, propelled futures higher. Cash jumped $4.10 on the National Daily Direct Hog report. Cutouts extended the gains on Tuesday by adding another $2.31. Packers may have been aggressive as they saw more indication of the level of demand over the holiday and needed to make sure they meet potentially stronger ongoing demand as the summer progresses. Weekly export sales are delayed until Friday. Saturday slaughter is estimated at 148,000 head.

	BULL SIDE		BEAR SIDE
1)	Feedlots may have greater resolve to hold for steady to higher cash due to lower corn and higher cattle futures.	1)	Cattle strength Wednesday was not supported by cash or boxed beef. That could run its course quickly if lower corn prices were all it had for support.
2)	Live cattle hold a discount to cash. If cash stabilizes, June futures will move higher as it will begin to converge.	2)	Indications are packers are not willing to step up this week as they still have cattle contracted ahead. Early indications are for lower cash again.
3)	Stronger cash and cutouts may indicate strong movement over the weekend along with anticipation of increased ongoing demand.	3)	Packers may not be as aggressive purchasing hogs Thursday as they have already been active this week. Generally, packers have been aggressive two days and then back off.
4)	The fund liquidation phase may have run its course with traders willing to get back into the market for the long haul.	4)	Now that hog futures have closed the chart gap, traders may be uncertain whether the strength of Wednesday will continue.

**

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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