DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $222.28 +$0.75*

Hogs: Higher Futures: Higher Lean Equiv: $124.37 +1.96**

*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:

Cattle tried to rally after initially opening lower but succumbed to selling pressure at midmorning as strong corn futures exhibited pressure as traders traded the correlation. Packers have reduced slaughter in the attempt to back up supplies of cattle somewhat and hopefully raise boxed beef prices and improve margins. Feedlots have played hardball the past few weeks and have benefited from it. Cattle supplies are tight and will not change anytime soon. Business is not expected to be accomplished until late in the week. Boxed beef prices were higher in both categories with choice up $1.42 and select up $0.26. USDA will release the June Cold Storage report Tuesday, showing the amount of beef in storage.

Hog fundamentals ended Monday very strong with cash up $3.79 on the National Daily Direct Afternoon Hog report and cutouts up $1.96. The midday cash report did not look too promising, but packers became more aggressive as the day progressed. Futures were influenced by the strong grain prices and spread trading, which put pressure on October and December. Demand is holding well for now, but traders remain concerned over demand late in the year.

	BULL SIDE		BEAR SIDE
1)	Lower corn futures overnight should increase the buying interest of those who trade that correlation. Cattle fundamentals are not bearish overall.	1)	If packers were able to purchase sufficient cattle for deferred delivery last week, they may not need to be aggressive this week.
2)	Feedlots will hold again this week for no less than steady cash with the goal of seeing cash a bit better.	2)	If beef increased in cold storage last month, it would indicate demand is being met and supplies are building. This could temper some of the potential for beef prices.
3)	Hog futures should trade higher in response to both higher cash and cutouts Monday.	3)	The potential bearishness of demand later in the year remains a cloud over the market, leaving December holding nearly a $25.00 discount.
4)	Strong demand should continue to provide overall support to the hog market in the near term.	4)	The amount of pork in cold storage may be higher than desired, leaving the market with limited upside potential.

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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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