DTN Early Word Livestock Comments
Livestock Futures Should Remain Supported
Cattle: Higher Futures: Mixed Live Equiv: $233.64 +$1.56*
Hogs: Higher Futures: Higher Lean Equiv: $104.07 -$0.14**
*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
The outlook has improved for cattle as the calendar moves closer to a higher demand period. Stronger cash last week and the potential for further gain this week have provided traders confidence to buy futures. Feeder cattle made new highs and are leading the complex. Packers are increasing slaughter as demand seems to be improving. Boxed beef prices were higher with choice up $2.68 and select up $1.15. Concern over the impact of tariffs on beef seems to have been factored in. China added 10% to 15% tariffs on beef and other commodities, but that may not impact overall demand. It is uncertain what will happen with tariffs on Canada and Mexico. The WASDE report will be released Tuesday, but will not be a market-mover for cattle.
Hog futures were supported Monday, moving contracts to the 50% retracement level on the charts. The July contract was able to close above $100, which could increase the buying interest of traders. Technical traders may have their sights set on the chart gaps that remain above the current level. However, fundamental support needs to be seen from consistently stronger cutout prices. Pork cutouts Monday declined $0.14. The National Daily Direct Afternoon Hog report showed cash up $0.01. Packers usually are not aggressive on Mondays, but this should support the market today.
| BULL SIDE | BEAR SIDE | ||
| 1) | Packers have been increasing cattle slaughter as margins have improved and demand seems to have increased. | 1) | Higher beef prices may impact demand and limit upside price potential of futures and cash. |
| 2) | Feeder cattle continue to make new contract highs as demand for cattle remains strong and supplies remain tight. | 2) | Boxed beef prices need to show consistent gains or traders may liquidate positions, limiting upside price potential. |
| 3) | Hog futures have had a strong rebound regaining about half of their losses since the middle of February. The delay of tariffs provided confidence that demand should remain strong. | 3) | Hog futures reached the 50% retracement level and need to close above that level or selling could be triggered. |
| 4) | Packers being somewhat aggressive in the cash market on Monday indicates they may need hogs and will remain aggressive Tuesday. | 4) | If pork cutouts cannot find consistent support, the upside potential for prices may be limited. |
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.
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Robin Schmahl can be reached at rschmahl@agdairy.com
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