DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $285.86 +$1.21*

Hogs: Higher Futures: Higher Lean Equiv: $117.93 -$1.48**

*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.

GENERAL COMMENTS:

Cattle futures opened higher and never looked back as traders became increasingly aggressive throughout the day. New contract highs were set in all cattle contracts. The August contract is quickly reducing the discount it had to cash. Cash cattle have not been traded so far this week, with the anticipation of no better than steady prices. However, with the surge in futures, feedlots might hold for higher prices. Boxed beef increased in both categories, with choice up $2.06 and select up $0.93. Demand for beef remains strong with good movement over the weekend. Feeder cattle prices are on the rise with increased prices paid at auctions.

It seemed as if hog traders were enamored by the strength of cattle that they had little interest in trading. Hog futures were mixed at the close with the market searching for direction. No price change was recorded for the National Daily Direct Afternoon Hog report with the weighted average for the day reported at $112.02. Light cash trade volume took place on Tuesday as packers remained uncertain over last week's demand. Pork cutout values declined $1.48, taking back nearly half the gains of Monday. Solid support remains elusive due to the choppiness of cutouts.

	BULL SIDE		BEAR SIDE
1)	New highs in all cattle contracts may increase the buying interest of traders as the uptrend has resumed.	1)	If cash cattle trade declines this week, traders could be quick to liquidate long positions, sending the market lower.
2)	The August live cattle contract holds a discount to cash, which may be reduced in the coming days.	2)	It is uncertain whether beef demand will remain strong during the warmer summer weather. Demand seasonally slows.
3)	Hog futures may be building support with contracts showing a rounded bottom technical formation.	3)	The choppiness of pork cutouts does not provide confidence in increased pork demand.
4)	The packers should step up today as their purchases so far this week have been limited.	4)	A chart gap remains substantially below the current market. Chart gaps are generally filled during the life of the contract.

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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