DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $244.29 -0.63*

Hogs: Steady Futures: Higher Lean Equiv: $141.66 +0.21**

* 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:

Boxed beef exhibited weakness again Tuesday. Yes, choice cutouts were able to close higher by only a penny but considering how the cutout had been gaining for quite some time, that minor gain does not change the direction cutouts seem to be moving. Select cuts took a beating, declining $2.99. It certainly does appear boxed beef prices may have reached a top. So far, that did not have an impact on the cash market with Northern cattle selling at $190-$191 while the South showed live trade at $119-$120. The volume of trade was light, which did not provide a good indication of overall business this week, but the fact that initial trades took place at those levels is encouraging. Maybe packers will need to bid no less than steady in order to accomplish business. More business should surface Wednesday, providing a better idea for the rest of the week.

Hogs put in a wild day Tuesday with significant selling pressure moving through contracts earlier in the day only to reverse and close higher in most contracts. The exceptions were July, August and October, which closed slightly lower. June and then December and later contracts again posted new highs as the higher trend seems unstoppable for now. Packers were not shy about needing hogs as prices on the National Direct Afternoon report showed an increase of $1.93. Cutouts supported the strength with an increase of $0.21. June, July and August futures are higher than June and August cattle. We know this will not remain that way forever, but for now, the trend remains up.

	BULL SIDE		BEAR SIDE
1)	Early indications are that cash cattle may trade no worse than steady with last week despite weakness of boxed beef.	1)	Decreasing boxed beef prices may have some negative impact on cash prices.
2)	Cattle futures were able to reject the lows Tuesday and close higher. This could indicate the market has found support.	2)	Funds have been reducing their long positions, a trend that does not bode well for futures prices.
3)	New contract highs in numerous months indicates the trend in hog futures is still up and traders continue to buy breaks and add to long positions.	3)	At the risk of sounding like a broken record, the chart gap in July remains way down at $116.85 and may be filled before the contract goes off the board in about a month.
4)	Tightened supplies and the potential for further tightness has packers actively looking for hogs and are paying more to get them.	4)	The market seemed a bit uncertain as to what do Tuesday, finally closing in the middle of the price range. This uncertainty could increase trader caution at these lofty prices.

**

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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