DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $293.44 -$0.04*

Hogs: Lower Futures: Mixed Lean Equiv: $118.98 +$0.60**

*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:

There seems to be nothing that will stop the rise of cattle prices. New contract highs are nearly a daily occurrence and price weakness is a buying opportunity. Traders may turn more attention to the upcoming Cattle on Feed report, but it may have little impact on the market. There have been some bearish reports over the past year that impacted the market briefly, but it continued to trend higher and the same may be true this time. The estimates for the Cattle on Feed report are for on-feed numbers on Aug. 1 at 98.1% of a year ago. Placements in July were at 91.2% and marketing in July was at 94.1%. Cattle inventories are generally the lowest of the year in August and if the average estimate is correct, it would be the lowest inventory since 2017. A few cattle sales took place at mostly steady money Wednesday. Packers may purchase more today rather than wait until closer to the report, as it will likely not make any difference in what they will pay. Boxed beef prices were mixed with choice down $1.35 and select up $3.40.

Hog futures floated on Wednesday with traders unable to find solid direction. Futures fluctuated nearly $2.00 in the nearby contract, spending time evenly on both sides of the close of the previous day. Futures are holding support, but there is not enough support to trigger buying interest and move prices higher. Cash was slightly higher with the National Daily Direct Afternoon Hog report showing a gain of $0.15. Packers have done quite a bit of business already this week, likely leaving them less aggressive Thursday. Pork cutouts increased $0.60, averaging $113.01. Weekly hog weights remained unchanged from the previous week and a year ago at 281.1 pounds.

	BULL SIDE		BEAR SIDE
1)	Cattle futures continue to move fearlessly higher with any weakness a buying opportunity.	1)	Traders may position themselves ahead of the Cattle on Feed report by taking some profits. This may result in a price retracement.
2)	The estimates for the Cattle on Feed report are bullish and may keep traders holding and adding to long positions.	2)	Beef demand may slow after the Labor Day weekend, which could put a top in the market, as consumer demand may not be as strong into the fall.
3)	Though hog futures are not trending higher, they are maintaining support. Traders anticipate hog prices will hold.	3)	The inability of cash hogs to trend higher will keep the discount in hog futures in anticipation of further weakness.
4)	The pressure on hog futures that developed on Wednesday did not hold, with prices rebounding as further selling did not materialize.	4)	Hog supplies are sufficient and weights are holding. There is little reason for packers to be aggressive with purchases. Tighter hog supplies are not expected.

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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