DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $214.42 -3.27*

Hogs: Lower Futures: Mixed Lean Equiv: $120.98 -0.91**

* 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:

Cattle futures closed mixed Wednesday in a somewhat uneventful trading day. June live cattle will finish their final trading day, moving August to the spot-month position. This is not expected to create any unusual volatility as the market will remain close to cash. August is trading at a slight discount, but it has two months to accomplish the task of anticipating where cash will be and then settling to it. The limited cash activity that has developed does indicate that cash prices might be higher. It has been a bit surprising that more cash activity has not surfaced given the low volume last week and the need to purchase cattle. Feedlots seem to have the upper hand at the present time and may hold for at least a couple dollars higher. Packers are keeping an eye on plummeting boxed beef prices and what it will take to meet demand. Choice cuts fell $5.09 with selects cuts down $3.56. Packer margins remain very profitable.

July hog futures shined Tuesday, closing with a double-digit gain. Later contracts just could not keep up with it, but still closed higher. The National Direct Afternoon price was down $1.90 and cutouts were down $0.91. That is not a good combination conducive to continued upside price movement. However, with hogs being marketed at lighter weights, and with some being so light resulting in discounts, the concern over continued tightening supply is alive and well. Traders may buy futures in anticipation of hog supplies becoming short. The mandate of slower chain speed may not be an issue for a week or so as July Fourth is the holiday with generally lighter slaughter numbers. Saturday slaughter is estimated at 12,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle has not been very active and the later in the week it goes without much activity, the better the potential for higher prices.	1)	Slaughter surrounding the holiday may vary, which may leave packers somewhat less aggressive to purchase supply until holiday demand is accessed.
2)	Feedlots seem to be holing the cards as they know packers will need to step up before the end of the week to purchase what they need this week and to make up for light trade lasts week.	2)	Packers and feedlots may be waiting to see the information from the Acreage and Quarterly stocks reports before becoming more serious about cash activity.
3)	July hogs hold a discount to cash with great strides made over the previous two days to move closer. Further strength is possible.	3)	July hog futures left a price gap below the market on the open Tuesday that will need to be filled.
4)	July and August hog futures closed a chart gap Tuesday and may be headed to close gaps that remain above.	4)	Cash continues to decline, reducing the upside potential for futures for the time being.

**

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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