DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $196.36 -$1.19*

Hogs: Lower Futures: Higher Lean Equiv: $117.81 -$1.38**

*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 just could not generate sufficient buyer interest to pull futures into positive territory Thursday. It seemed the goal was to close the chart gap left from last week, but once that was accomplished selling continued as stops were triggered. Friday, traders are staring at the Cattle on Feed report that will be released after the close. This may keep trading activity subdued prior to the weekend. June live cattle have one more week remaining of trade, and it is confusing indeed that futures are below cash. This week has been interesting in the cash market as Southern cattle have traded steady to as much as $2.00 lower than the previous week. However, Northern dressed cattle increased $2.00 to $4.00 Thursday as packers stepped up to the plate. Boxed beef was lower again with choice down $1.91 and select down $1.05. Beef in cold storage during the month of May totaled 519.8 million pounds, up 25% from a year ago.

Hog futures found no support Thursday, eliminating the gain of the past week. Traders became disillusioned with slower slaughter pace and the uncertainty of demand. Cash was softer with the National Direct Afternoon report showing a loss of $1.63. Cutouts were down $1.38. It is interesting that, for a while, belly stocks were substantially lower than the previous year and bacon prices were significantly higher. The May Cold Storage report showed belly stocks at 56.4 million pounds, up 55% from a year ago. In fact, total pork supplies are the highest they have been since April 2020. Weekly export sales will be released Friday morning and will need to be good. Saturday slaughter is estimated at 20,000 head.

	BULL SIDE		BEAR SIDE
1)	June cattle futures are holding a discount to cash with one week remaining of trade. Futures should pull higher.	1)	The Cattle on Feed report may keep trading mixed Friday as traders are uncertain as to what the report will show.
2)	The jump of cash for dressed beef shows packers needed cattle to meet demand and they did not have enough purchased for the week. This should support futures.	2)	Beef in cold storage has increased significantly from the previous year, which seems to indicate lower demand.
3)	Hog futures are moving in a sideways range with the selling Thursday keeping the market within that range. Futures are expected to recover somewhat as the selling may have been overdone.	3)	The selling Thursday in hog futures may have been triggered by the inability of futures to move higher Wednesday through chart resistance. Traders took profits and stops were hit.
4)	Another week of strong export sales might bring support back into the market Friday as well as some short-covering into the weekend.	4)	Slaughter pace continues to run below year earlier levels, keeping sufficient supply available for demand.

**

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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