DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $246.26 +3.91*

Hogs: Lower Futures: Mixed Lean Equiv: $136.32 +2.47**

* 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:

It was a banner day Thursday for the cattle complex. The news of JBS being back online had traders buying futures aggressively. The crisis was averted, and consumers were buying beef. Boxed beef prices went through the roof with choice up $5.60 and select up $5.43. The expectation is that overall supplies might be tighter for a period of time as slaughter levels will take some time to get back up to full speed again. As expected, packers are not aggressive in the cash market with some trading activity Wednesday in the South at $120, which is about steady to $1.00 higher than last week and steady at $191 in the North. This is likely not to change as cattle will back up to some extent in feedlots as it will take a little while to process through the market-ready cattle. Packers know the cattle are out there. With steady cash, futures might have a difficult time following through.

Hog futures struggled Wednesday in closer contracts. However, the June, December, and February contracts were able to post new highs. July was the recipient of selling due to the perception of the potential for some backup of supplies over the next month as result of the brief JBS cyberattack. However, packers remain aggressive and continued to purchase quite a few hogs Wednesday at slightly lower cash. Cutouts jumped $2.47 Wednesday on strong demand. The trend is still up, and the dip of futures may be short-lived. Saturday slaughter is estimated at 154,000 head as plants make up for the holiday and the JBS disruption. What is interesting is that as of Wednesday, there were 18 plants that indicated they would remain dark on Saturday.

	BULL SIDE		BEAR SIDE
1)	Cattle futures erased all of the losses on the rebound Wednesday. This generally results in follow-through buying as the market closed strong.	1)	It will take some time to overcome plant disruptions due to the JBS cyberattack. This may back up cattle in the market, leaving little reason for packers to bid higher.
2)	Continued steady cash required the June live cattle contract to adjust higher and yet remains at a discount to cash. There is more upside potential.	2)	The strong rebound of futures may have been s relief reaction by traders and now may settle back down to assessing the overall fundamentals, which do not point to continued higher prices at the present time.
3)	Aggressive packer buying of hogs Wednesday indicates they still need hogs. Strong demand requires steady supply and the disruption early in the week will need to be made up for.	3)	July hog futures have a small chart gap from Friday that will need to be closed. The gap would be closed if price moves back to $116.85. It got close Wednesday but could not accomplish it.
4)	Strong Saturday slaughter indicates the determination to make up for lost time in the attempt to keep a steady supply.	4)	Packers may back off the rest of the week due to their aggressive purchasing Wednesday. Weaker cash could develop.

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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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