DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $198.14 -$0.85*

Hogs: Steady Futures: Mixed Lean Equiv: $113.49 -$2.83**

*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:

Cash cattle trade developed with packers turning aggressive. Cattle in the South traded $2.00 higher while Northern dressed were $4.00 higher. This was a much-needed shot in the arm for traders. This eliminated the futures losses of the week and closed the chart gaps that were left on Monday. Even through the Fed increased the interest rate and inflation is still rampant, demand for beef remains. However, boxed beef has been struggling recently with choice down $1.22 and select down $1.14 on Wednesday. Further cash business will be done Thursday, but the level has been set for the rest of the week. Weekly export sales will be released and hopefully will show some better sales than we have seen recently.

Hogs both went for the ride as well as moved higher on their own accord. The strength of cattle had some spillover impact on futures, but the strength in July stemmed from strong cash on Tuesday. Further strength of cash continued with a gain of $0.61 on the National Direct Afternoon Hog report. If the pattern of previous weeks holds, this may be about it for cash strength for the week. The bearish aspect of Wednesday was cutouts posting a loss of $2.88. Weekly export sales will be released and will hopefully show strong international interest. Saturday slaughter is estimated at 47,000 head.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle and strong slaughter pace should support futures.	1)	Live cattle opened higher leaving a chart gap that will need to be filled.
2)	Feeder cattle are in demand with continued strong prices at sale barns. The supply is tighter as a result of the liquidation last year due to the drought.	2)	Packers are increasing purchases for deferred delivery which may limit their aggressive buying in the coming weeks.
3)	July hogs have rebounded near the level June went of the board. Strong cash this week may indicate increasing demand and tighter supply.	3)	The weakness of cutouts over the past two days does not bode well for strength of hog futures.
4)	There is an idea slaughter speeds are lower due to a tighter hog supply in the country and not because more hogs are available. If so, cash and cutouts should reflect that soon.	4)	Spread trading continues to take place which keeps the market volatile but does not establish a price trend.

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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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