DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $281.57 -$4.29*

Hogs: Higher Futures: Mixed Lean Equiv: $117.98 +$0.05**

*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 made substantial gains over the past three days despite no cash cattle trading and the staged reopening of cattle imports from Mexico. It turns out that the trade seemed to know that it would be short-lived. Secretary Rollins took action on Wednesday and closed the border to imports of cattle from Mexico due to the discovery of the New World screwworm 370 miles south of the U.S. border. This is closer than the previous discovery that had closed the border. This is expected to provide further strength to the cattle market today as traders react to the news. However, we could see some liquidation as this may already be factored in. Traders may sell a higher opening due to the large decline in boxed beef on Wednesday. Choice boxed beef fell $6.59 with select down $5.19.

Hog futures seemed to find further technical support due to limited strength from cash or cutouts. The packers stepped up aggressively to purchase hogs as a large volume was posted. However, they did not need to bid up to obtain them as the National Daily Direct Afternoon Hog report showed cash down $0.12. Pork cutouts did not provide much support, with a gain of only $0.05. The market continues to search for solid fundamental support. Hog weights continue to decline, averaging 282.7 pounds last week.

	BULL SIDE		BEAR SIDE
1)	The U.S./Mexico border has been closed to imports of cattle again as the New World screwworm was found closer to the border than in the previous discovery.	1)	Boxed beef price posted the largest decline in both categories seen in a long time. The summer slump in demand may be starting.
2)	New contract highs on Wednesday keep the uptrend intact and traders confident to buy into the market.	2)	Even though the border is closed again, it may already be factored in with the price strength over the past three days. This could result in some profit taking.
3)	Weekly hog weights continued to decline last week to an average of 282.7 pounds. This is 1.4 pounds below the previous week and 2.6 pounds below a year ago.	3)	Hog futures seem to be supported technically and not fundamentally. Without fundamental support, there may be limited upside price potential.
4)	Pork demand is expected to improve after the recent lull. Continued high beef prices should cause more consumers to turn to pork.	4)	There are sufficient supplies of market-ready hogs. The packers have been able to purchase what they need for slaughter without having to bid aggressively.

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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