DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $200.36 -$0.03*

Hogs: Steady Futures: Higher Lean Equiv: $116.81 +$0.07**

*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 had a strong cash week with packers still buying Friday. Packer activity Friday suggests cash will be stronger this week. Boxed beef prices are not indicating a trend higher, but slaughter pace continues to remain brisk. Choice cuts increased $0.22 while select cuts declined $0.72. Feedlots will be looking for higher prices again this week. The World Agricultural Supply and Demand report showed estimated beef production up 65 million pounds from the May estimate with average price remaining unchanged at $140.10.

Hog futures were able to see a relief bounce after a brutal week. Cash did not support the bounce as the National Direct Afternoon report was down $2.69. Cutouts closed slightly higher with a gain of only $0.07. Tuesday is the last day to trade June hogs with July taking over as lead month Wednesday. Slaughter pace was down significantly last week and it did not appear it was due to tighter market-ready numbers. USDA raised estimated pork production this year by 220 million pounds from May and reduced the average price $0.50 to $70.60, according to the World Agricultural Supply and Demand report.

	BULL SIDE		BEAR SIDE
1)	Strong cash trade Friday suggests a strong potential for higher cash this week.	1)	Inflation reached the highest level in over 40 years, driven by gasoline, housing and groceries. This may impact demand.
2)	Packers seem to be short bought and need to be active in the market. Slaughter pace has been brisk, with supplies current.	2)	Packers will assess demand over the weekend and wait for new showlists before determining how aggressive they need to be.
3)	Hogs may have found a level of support with increased trader interest to buy the break.	3)	The bounce of hog futures Friday was not supported by cash. Packers may wait to see the level of demand over the weekend, leaving them less aggressive in the market.
4)	Hog futures held technical support Thursday, possibly indicating traders are buying the dip.	4)	June hogs will go off the board Tuesday, and July still has a chart gap below the market that may be filled.

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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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