DTN Early Word Livestock Comments
Traders Anticipate Better Cash
Cattle: Steady Futures: Mixed Live Equiv: $222.35 +$1.02*
Hogs: Steady Futures: Mixed Lean Equiv: $116.32 -$2.97**
*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.
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The trading correlation between the cattle complex and corn futures is old and really, when you think about it, one day of an increase or decrease in corn prices is not going to have an influence on the price of cattle. However, that has been a long-standing correlation that continues to be traded, having an influence on the market. Thus, it has an impact on trading from day-to-day. The more important aspect is the strength of boxed beef for the second day with choice up $1.13 and select up $1.98. Maybe demand is increasing again. Whether that will translate into higher cash prices is yet to be seen. Currently, the anticipation is for steady cash. A few light sales took place Wednesday, providing no strong indication of cash with more sales expected Thursday.
Hog futures opened lower and could not get back into positive territory, eliminating the gains of the previous two days. Traders remain bearish for prices after the August contract finishes trading. October hogs hold a $20.00 discount to August with August going off the board Monday. Cutouts fell again Wednesday with a decline of $2.97 on top of the large decline the previous day. The fact that cash was higher Wednesday had no influence on the market. The National Direct Afternoon Hog report showed a gain of $0.31. Little trading influence is expected from the weekly export sales report Thursday morning.
| BULL SIDE | BEAR SIDE | ||
| 1) | Steady or higher cash will support cattle futures with traders seeming to anticipate at least steady cash. | 1) | Cattle futures may be establishing a sideways trading range as slower slaughter may impact the strength of cash limiting upside potential. |
| 2) | Cattle may have found a level of support last week with prices potentially retesting the highs at some point. | 2) | Packers may play hardball this week as they already have some cattle purchased ahead. |
| 3) | It is unlikely summer demand is over with pork being good value compared to beef. Consumer demand should remain strong. | 3) | The drop in hog futures after two days of strength is negative for the market. Futures are not able to move above technical resistance. |
| 4) | The large discount to cash in the October contract should begin to decrease once August finishes trading. | 4) | Another day of losses in cutouts does not bode well for positive trading Thursday. Continued demand is a concern. |
NOTE:
To learn the latest on 2023 corn and soybean yield expectations, join us the week of Aug. 7-11 on the DTN Digital Yield Tour, Powered by Gro Intelligence. Each day we'll have updated yields for key states in our Top Stories news menu. For background information on the tour, see here: https://spotlights.dtnpf.com/…
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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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