DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $261.82 -$0.55*

Hogs: Higher Futures: Higher Lean Equiv: $98.14 +$1.53**

*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:

Traders seem to have been disappointed with cash trade Friday. It seemed they had expected packers to raise bids to purchase cattle, and little further business was done by the close of trading. Cash trade did develop in the South $1.00 higher than the previous week, while Northern dressed cattle were $5.00 higher, at the level they traded on Thursday. Cattle did not trade as high as many anticipated, but feedlots held out and were not willing to settle for even these gains. They will likely hold this week for higher prices as they believe packers will need cattle and will raise bids. The only concern is boxed beef prices are not trending higher. Prices were mixed Friday, with choice down $1.16 and select up $0.11. The WASDE report will be released Monday and will be the focus of the trade with projections on beef price and production. The Commitments of Traders report showed fund traders increasing their net-long live cattle positions by 1,513 contracts to 93,727. There were 1,562 contracts added to the long position in feeder cattle, raising the total to 17,391.

Hog traders had difficulty finding something to provide price direction Friday. Futures closed mixed with minor losses in the nearby contracts. However, the June and later months continued to make new contract highs. Strong optimism remains for prices during the second half of the year. Packers were not aggressive throughout the entire week and did not pay higher prices to obtain hogs. This may need to change this week, as the strong slaughter pace will need hogs to maintain, and not many were purchased last week. The National Direct Afternoon Hog report showed cash down $1.29 with only 1,026 head purchased. Pork cutouts fared better with a gain of $1.53. The Commitments of Traders report showed fund traders increasing their net-long position by 2,090 futures contracts to 78,397.

	BULL SIDE		BEAR SIDE
1)	Feedlots will hold out for higher cash, knowing packers will need cattle this week to maintain slaughter.	1)	The cattle market may be running out of steam. The inability of prices to move higher Friday may trigger a selloff.
2)	Cattle futures traded sideways during the second half of the week and may be building support for the resumption of the uptrend.	2)	Bullish market fundamentals may be factored into the cattle market. A bull market needs to continue to be fed; otherwise, it will turn lower without further support.
3)	Hog futures during the second half of the year continue to make new contract highs as optimism for better demand remains strong.	3)	Hog futures may have difficulty finding continued support on optimism without fundamental support.
4)	Hog slaughter remains strong, which will keep packers buying hogs. This may tighten the supply of market-ready hogs in time.	4)	Packers have not had to be aggressive as market-ready hogs have been available. They have not had to pay higher prices to obtain them to fulfill the slaughter pace.

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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