DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $196.56 +$0.20*

Hogs: Higher Futures: Higher Lean Equiv: $120.06 +$2.25**

*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:

Traders were uncertain over the numbers that would be released on the Cattle on Feed report after the close on Friday. After all, the previous two reports showed some bearish surprises. However, those fears were unfounded this time as the report was neutral to slightly friendly this time around. On feed numbers were slightly below the trade estimate at 101%. Placements were 98% compared to the average trade estimate of 99.8% and marketings for the month of May were 102% of a year ago compared to the estimate of 103%. This report may not be much of a market mover but may at least provide some support. Traders will focus their attention on the potential for cash this week. It is difficult to say how aggressive packers will need to be this week. Strong cash the past two weeks could suggest cash cattle at no less than steady prices with last week. Boxed beef was higher with choice up $0.32 and select up $0.08. Lower corn futures overnight should provide support for feeder cattle with the potential to take back the losses of Friday.

Hogs made a nice rebound on Friday due to the market being overdone to the downside and limited the losses for the week. Cash was lower with the National Direct Afternoon report down $0.59 but that was overridden by a gain in cutouts of $2.43. One main problem for the market is the continued slow slaughter pace. The slaughter on Friday was 25,000 head less than the previous week and 10,000 head less than a year ago. This begs the question as to whether higher hog weights are providing that much more tonnage to the market or are supplies tighter making it more difficult to find market ready hogs? Hog weights are coming down from a week ago showing nearly 3 pounds less than the week ending June 11. However, they are still over 4 pounds above a year ago. The Quarterly Hogs $ Pigs report will be released on Wednesday.

	BULL SIDE		BEAR SIDE
1)	The Cattle of Feed report was neutral to slightly friendly which should support the market.	1)	Packers may have purchased sufficient cattle ahead for this week leaving them less aggressive in the market.
2)	Feedlots will set their sights on higher cash and not be too anxious to sell.	2)	Marketings of cattle during the month of May were a little less than expected. This may keep a lid on price potential in the near term.
3)	Cutout strength should result in more follow through buying in hogs to regain the losses of Thursday.	3)	Slaughter continues to run below a year ago leaving more hogs available to the market.
4)	Hog weights are declining and moving closer to year ago levels. Packers may need to purchase more hogs.	4)	Lower weekly export sales of pork from the previous week are not supportive to the market. International demand needs to improve.

**

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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