DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $197.63 -$0.51*

Hogs: Steady Futures: Higher Lean Equiv: $119.01 +$5.57**

*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 treaded water Thursday, trading in a limited range even though cash cattle in the South traded as much as another $2.00 higher, adding to the earlier gain of $2.00 already this week. Packers needed cattle and had to raise bids to get them. Packers and traders are assessing the impact the heat wave is having on cattle. There are reports of significant death losses in some areas with Kansas primarily hitting the newswires. Not only are cattle being lost, but the heat is hindering performance. This is a bullish combination. However, concern over consumer demand is also being assessed with boxed beef prices down again Thursday. Choice declined $1.06 with select down $0.30. Weaker boxed beef has been the pattern this week. Weekly export sales provided little support with sales down 2% from the previous week.

Hog futures opened lower and then turned higher as Thursday progressed. Cash trade pointed lower, putting some pressure on the market. But as cutout prices showed a gain of $4.04 on the midday report, traders become more confident in owning futures. The final price of cutouts for the day showed a gain of $5.57 and should provide further support to the market Friday. Lower cash did offset some of the potential with the National Direct Afternoon Hog report showing a loss of $2.52. However, cutouts are the key to price strength. Weekly export sales were 65% better than the previous week at 27,600 metric tons (mt) but still not enough to get extremely excited about. Saturday slaughter is expected at 47,000 head.

	BULL SIDE		BEAR SIDE
1)	The further increase of cash for Southern cattle Thursday means packers need cattle and are concerned over death losses from the heat wave.	1)	Boxed beef prices continue to slip, indicating consumers may be leaving higher end cuts of meat on store shelves.
2)	Hot weather will impact cattle performance, resulting in lighter cattle. Lighter cattle will require more head to obtain the same tonnage. Reduced numbers due to death loss may mean higher cash.	2)	Restaurant traffic is slowing with some reports of places reducing hours during times when traffic is light. This will impact food service demand.
3)	The large increase of cutouts Thursday should provide further support to the market Friday. More demand may be shifting to pork.	3)	Cash is struggling due to sufficient supply of hogs being readily available for reduced slaughter speeds.
4)	Weekly export sales could have been better, but the fact that they were substantially higher than the previous week and slight above the four-week average is positive to the market.	4)	July hogs have a chart gap remaining below the current level which may be filled and is on the mind of technical traders.

**

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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