DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $198.77 -$1.10*

Hogs: Higher Futures: Higher Lean Equiv: $126.70 +$0.45**

* 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 are struggling both technically and fundamentally. The performance of the cash market over the past few weeks does not indicate there will be much change this week. The hope is that cash will trade steady with last week, but there is concern packers may pull back this week. Boxed beef continues to decline on nearly a daily basis and they already have some cattle on the books for the next few weeks. Packer profits are still good at nearly $380 per head, but they do not like to see that profitability dwindle and will take steps to reduce the bleeding. Boxed beef showed choice cuts down $1.93 with select cuts down $0.69 Friday. Choice cuts fell $11.23 last week while selects cuts fell $6.01. This week may be slow to develop as feedlots are not really in a position to bargain. Holding out for higher cash may not net any benefit as packers seem to be in control and in no need to be aggressive.

Support in the hog market was uncovered with the announcement from Germany that they have two cases of African swine fever in two separate herds. Thoughts of potential increased export demand surfaced with domestic supplies already tight and potentially tightening further. China is not the only country in the news for market participants to watch. Finding two cases could potentially result in more cases as further testing is done. Hog prices declined $3.44 on the National Direct Afternoon report. Cutouts increased $0.42. Both of these were overshadowed by the news. Follow- through buying is expected Monday as traders may be more willing to step back in on the long side.

	BULL SIDE		BEAR SIDE
1)	Beef may find some stability as lower prices may spur greater consumer demand.	1)	Cash cattle may not trade any better than steady this week with some risk of lower trade possible.
2)	Cumulative beef sales so far in 2021 have reached 708,000 metric tons (mt), up 157,400 mt from last year and up substantially from the five-year average.	2)	Cattle futures are at risk of retesting the recent lows due to technical weakness.
3)	October and later hog futures made new highs since the recent lows set on June 24. There are price gaps in the charts that need to be closed.	3)	Net cancellations of pork by China on the recent weekly export sales report does not bode well for continued business with the country. This could leave more pork for the domestic market.
4)	African swine fever found in Germany may propel futures prices higher in anticipation of greater export demand.	4)	If no further cases of African swine fever are found in Germany, futures could fall back.

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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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