DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $198.18 +$0.58*

Hogs: Higher Futures: Higher Lean Equiv: $118.90 -$1.01**

*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:

Some of the exuberance that carried over from last week's jump in cash has been tempered as the prospect of a repeat of the same looks less likely. However, the $4.00 increase last week was a surprise, so anything is possible again this week. Packers are seeing higher showlists, which may provide them the confidence cattle can be purchased without much difficulty. The pace of cattle slaughter remains brisk, which keeps packers needing cattle. Feedlots may have higher showlists but lower grain prices may give them the confidence to hold for higher cash. Boxed beef prices were higher with choice up $1.06 and select up $0.31. Feeder cattle traders thrived on the lower grain prices, pushing futures significantly higher. That may be tempered a bit with mixed corn futures overnight.

Hogs could not be held back Tuesday as evidence of aggressive packer buying spread through the market. The final tally showed cash up $4.11 on the National Daily Direct Afternoon Hog report. However, cutouts were down $1.01, tempering some of the gains that could have been realized. However, the July contract put in the highest close since April 28. A negative aspect of the market is that slaughter pace continues to lag. There was a large revision to Monday's slaughter with the actual number being 18,000 less than initially stated.

	BULL SIDE		BEAR SIDE
1)	Live cattle are at a discount to cash which should provide support if cash is able to hold steady or higher this week.	1)	Live cattle contracts have a chart gap below the market and now so do feeder cattle. These gaps likely will be filled.
2)	August feeder cattle were the beneficiaries of lower corn futures. The corn crop is 70% good/excellent indicating the potential for a good crop and lower price.	2)	If cash cattle trade no better than steady this week, it may be a disappointment to the trade.
3)	Hog futures are poised to retest the highs of earlier this month. A break above those highs will bring in more fund buying interest.	3)	Hog slaughter continues to run below a year ago which is a concern. Tighter supplies with lower slaughter pace do not bode well for higher prices.
4)	Overall strengthening cutouts should continue to provide support to the market. Prices may fluctuate but the trend is higher.	4)	Hog futures are near technical resistance which may bring in sellers more aggressively once those levels are reached.

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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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