DTN Early Word Livestock Comments

Cattle: Steady. Futures: Mixed. Live Equiv: $193.72 +$0.35*

Hogs: Steady. Futures: Mixed. Lean Equiv: $112.59 +$0.54**

*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:

Packers and feedlots spent another day looking at each other, waiting for someone to blink. The Fed Cattle Exchange showed no activity, leaving it up to the country to decide strength or weakness. Cash is expected to trade Thursday as time is running out for the week. The decline of live cattle futures has traders anticipating cash will be no better than steady. Boxed beef prices were higher again Wednesday with choice up $0.18 and select up $1.43. However, this may not play a significant role in the direction of cash due to it being too early to tell if stronger beef prices will continue over the next month. Weekly export sales may have some influence on the movement of futures but likely not on cash sales.

Cash is anticipated lower for hogs. Three days of higher cash is generally sufficient to purchase the required hogs leaving packers less aggressive the second half of the week. The National Direct Afternoon report showed cash up $0.87 with a weighted average of $107.73. Cutouts increased $0.54 at $105.02. Cash being higher than cutouts is causing some anxiety among packers. However, this trend may not change anytime soon if hog supplies continue to tighten, and packers need to pay more to obtain sufficient numbers to satisfy demand. This may be one reason what slaughter pace is running below a year ago. It is also a reason why Saturday slaughter has been slowly declining. Projected slaughter for Saturday is 59,000 head. Weekly exports sales should influence the direction of futures Thursday.

	BULL SIDE		BEAR SIDE
1)	Steady cash cattle trade this week could allow futures to hold recent gains and provide some confidence to traders to buy into the market.	1)	Lower corn futures Wednesday had little impact on the cattle complex. It will take more than that to provide sustained support under the market.
2)	The recent weakness of corn futures may result in feedlots holding out for higher cash even if they need to hold over into next week.	2)	Packers do not seem anxious to bid higher for cattle this week. The Fed Cattle Exchange auction showed no activity with offers as low as $140 unable to garner interest.
3)	Hog supply seems to be tightening with packers aggressively looking for supply. This has pushed cash above cutouts.	3)	Cash is expected to be lower for hogs Wednesday if the pattern holds of the past few weeks. Packers may have purchased sufficient supplies.
4)	June through August lean hog futures moved to new highs Wednesday, indicating traders anticipate higher prices during the summer months.	4)	If weekly exports sales are lower and China is not listed as a buyer, futures may show weakness.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. 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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