DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $200.50 +$0.59*

Hogs: Higher Futures: Mixed Lean Equiv: $115.48 -$0.96**

*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:

There was no direction from cash with no activity surfacing. This left traders to trade the anticipation of no worse than steady cash. Although no one tipped their hand Tuesday, the feeling is that feedlots may be able to receive at least steady prices with last week. Live cattle futures regaining the losses of Monday should provide optimism to feedlots. However, higher corn price and another new contract high for July crude oil overnight may influence the outlook for demand. Boxed beef prices Tuesday were mixed with choice up $2.12 and select down $0.32. Feeder cattle closed higher but did not regain the losses of the previous day with futures posting a lower low and lower high. Futures may struggle a little Wednesday.

Hog futures rallied nicely after opening lower in all contracts through the rest of the year except June. June had a tight trading range, closing lower as time is running out for the contract and it will remain somewhat closely aligned with the index. Packers were aggressive Tuesday as they purchased a significant number of hogs. The National Direct Afternoon report showed an increase of $4.65. putting 14,307 hogs on the books. Some of this aggressiveness should carry through Wednesday as packers want to purchase early. Even though cash was higher, cutouts are what drives the market and values down $0.96 was not supportive to igniting a bullish fire under the market.

	BULL SIDE		BEAR SIDE
1)	Cash cattle are anticipated to trade no worse than steady this week, which may keep a positive attitude in the market.	1)	Corn futures rebounded so far this week and were higher again overnight. Feed prices remain expensive with feedlots less inclined to hold for higher cash.
2)	The higher number of cattle expected to come to the market in the near term may be absorbed without much difficulty as demand seems to be holding.	2)	Dressed cattle weights increased last week, averaging 824 pounds. This was 7 pounds higher than the previous week and higher than a year ago.
3)	Cash hogs were higher Tuesday and should be higher again Wednesday if the weekly pattern remains. Packers need hogs to keep the current slaughter pace satisfied.	3)	Without continued support from cutouts, hog futures will struggle to move higher. Demand does not seem as strong as anticipated.
4)	Hog futures rebounding after the lower opening indicates traders were interested in owning contracts with the anticipation of continued strong demand providing support to cutouts.	4)	One or two days of stronger cash seems to be all packers are willing to give. The rest of the week, the needed hogs are purchased at weaker prices.

**

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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