DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $236.05 +0.84*

Hogs: Steady Futures: Mixed Lean Equiv: $125.92 +1.21**

* based on formula estimating live cattle equivalent of gross packer revenue.

(The Live Cattle Equiv. 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:

USDA's Foreign Agricultural Service released a correction to the weekly export sales report for beef. There were only 34 metric tons (mt) of beef sold to the Netherlands rather than the 33,700 mt that were reported. A correction will be made on the export sales report next week. This makes a huge difference. Rather than the reported export sales of 56,900, export sales for the week were 23,234 mt. This may have a large impact on cattle futures. Futures did not respond to the marketing-year high sales number Thursday, but this may have a greater impact. Traders also will have the Cattle on Feed report to ponder as the day progresses. The report will be somewhat difficult to decipher as it will be compared to last year. Placements and marketings will be distorted due to the disruptions of COVID-19 last year. Total cattle on feed might be the only number that some sense could be made of, but still not an accurate representation. The trade estimates total cattle on feed up 3.7%, placements up 20.7% and marketings up 33%. Boxed beef continued higher Thursday with select cuts breaking above $300 level only the second time in history.

Hog futures put in a good day Thursday, extending the gains of the week even though cash was slightly lower, according to the National Direct Afternoon Hog report. This was made up for with a strong cutout value of $119.22, up $1.21. Good export sales of 19,220 mt, up 29% from the previous week, also provided support. It seems as if traders have gained confidence to buy back into the market more aggressively. June closed its chart gap that was left on May 13. Saturday slaughter is estimated at 25,000. This is higher than the previous two weeks due to a plant having mechanical issues during the week moving those hogs to Saturday to make up for the downtime.

	BULL SIDE		BEAR SIDE
1)	Cash cattle were able to hold generally steady this week after some anticipation of lower prices.	1)	The export sales reporting error by the USDA may have a negative impact on the market.
2)	Cash cattle trade has been light so far this week. Packers might become more aggressive Friday in order to increase ownership due to strong beef demand. Cash could see some late strength.	2)	The Cattle of Feed report may not have much influence due to the difficulty of making a comparison to last year. This may leave the market lethargic.
3)	Hog futures extended that gains of the week and may be poised to revisit the highs again.	3)	June hog futures closed the upside gap Thursday, which could be the extent of the gains for the time being now that that was accomplished.
4)	Traders seem confident to buy back into the break more aggressively. The potential of tighter supply still hangs over the market.	4)	Packers have not been very aggressive with purchases this week but have still been able to obtain a sufficient number of hogs.

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For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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