DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $270.61 -$0.34*

Hogs: Higher Futures: Higher Lean Equiv: $123.75 +$1.47**

*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 closed higher for the week, but the second half showed futures holding and unable to push higher. The cash cattle trade, steady to $1.00 higher, was factored into the market. Traders remain bullish but are concerned over the weakness of boxed beef. Choice boxed beef gained $0.77 Friday while select declined $1.00. Gains in boxed beef prices have not been common over the past two weeks. Demand seems to be slowing, maybe due to a combination of summer weather reducing beef consumption and high prices. There has been nearly as quick an erosion of packer margins as there has been a gain over the few weeks. There has been a reduction in slaughter in the attempt to regain those margins. The Commitments of Traders report showed the fund traders adding 2,808 long futures contracts to live cattle, increasing their net-long position to 126,572. Feeder cattle had an increase of 70 long positions, bringing their net-long to a record 36,266 contracts.

Hog futures rebounded nicely last week after liquidation ran its course. The market had been overdone to the downside, triggering some buying interest. The recent strength in pork cutouts renewed the optimism over demand. Pork cutouts on Friday gained $1.47 with values reaching $117.79. Cash took it on the chin Friday with the National Daily Direct Afternoon Hog report falling $5.15 on low volume activity. The decline in cash may be recovered early this week, as we have seen substantial losses such as this being short-lived. The Commitments of Traders report showed fund traders reducing their long positions by 14,390 contracts to a net-long of 114,008.

	BULL SIDE		BEAR SIDE
1)	Cash cattle were steady to $1.00 higher last week. Feedlots will hold for higher cash this week as they know packers did not purchase a large amount of cattle.	1)	Boxed beef prices have been showing weakness, indicating demand is slowing. This will impact the cattle price.
2)	The market held near the highs for the last half of the week as traders remain bullish on prices.	2)	Beef packer margins are sliding, and they will attempt to defend their margin by reducing slaughter and backing up cattle in the market.
3)	Hog futures had a nice rebound after the liquidation phase ran its course. Traders may have renewed their interest in owning contracts for the longer term.	3)	Cash hogs have been struggling as packer margins are not very good. They were not aggressive buyers Friday.
4)	Pork cutout prices have been trending higher, indicating strong demand. This may continue throughout the summer.	4)	The large decline of cash hogs Friday moves cash in line with the August futures contract. Traders have little reason to add more premium to 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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