DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $199.87 -$1.64*

Hogs: Lower Futures: Mixed Lean Equiv: $126.25 +$0.83**

* 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:

Traders could not find solid direction for livestock futures Thursday. Live cattle could not find anything to get excited about from weekly exports sales as they only reached 9,300 metric tons (mt), down 61% from the previous week and 44% from the four-week average. Packers purchased cattle Thursday, but prices remained steady with last week. Any cleanup business Friday will likely be at steady prices. Boxed beef prices fell with choice cuts down $3.01 and select cuts down $1.27, moving cutouts to the lowest level since early April. Continued weakness of boxed beef does not bode well for higher cash as time progresses. This, along with the fact that packers have been able to purchase ahead without difficulty, may limit upside potential. Traders are not diving in to purchase futures as they see little reason for stronger prices. Futures already have premiums built into the market through April of next year, which provides hope of better prices.

Hog futures closed a little better than cattle Thursday with most contracts in positive territory. However, the cash market turned quickly on its head with the National Direct Afternoon report showing a decline of $3.03. Packers did not need to be as aggressive as they had already purchased quite a few hogs for the week. Export sales did not provide the support bullish traders had hoped for as sales only reached 10,600 mt, down 76% from last week and down 68% from the 4-week average. China was not even listed as a buyer, which increases the concern over their ongoing pork import needs. However, the fact that futures could hold and close higher in most months is testimony to the fact that tightening supplies may be of greater concern. As of Thursday morning, it was indicated that a couple of packers did not yet have sufficient hogs for next week's kill. Projected hog slaughter for Saturday is 12,000 head.

	BULL SIDE		BEAR SIDE
1)	Steady cash cattle prices should provide support to futures through the end of the week.	1)	Packers are already purchased ahead for the next few weeks, which could leave them less aggressive in the cash market next week.
2)	Futures being able to close mixed, even though weekly export sales were not very good, indicates lighter weights and current marketings will require more cattle to meet demand.	2)	Futures need to find some buying interest or risk falling back to the recent lows.
3)	Packers have been able to purchase hogs, but supply is tightening and they need to scour the countryside to find sufficient numbers to keep plants operating efficiently.	3)	China not listed as a buyer of pork on the weekly export sales report does not bode well for export business.
4)	Hog futures have a substantial discount though the December contract. Tightening hog supply makes later futures look underpriced.	4)	Price gaps remain in the August and October futures contracts that may be filled sooner rather than later.

**

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

(c) Copyright 2021 DTN, LLC. All rights reserved.