DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $196.30 -$0.11*

Hogs: Steady Futures: Mixed Lean Equiv: $111.91 -$1.02**

*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:

Live cattle succumbed to the idea of more cattle potentially coming to the market over the next few weeks and packers having purchased cattle ahead for the next few weeks reducing the need to be as aggressive in the market. June is the lead month, carrying with it a discount to cash. That discount widened as futures fell $5.78 over last week. This may be tough to overcome as packers may pull back on what they are willing to pay. Boxed beef prices declined with choice down $1.82 and select down $3.09. Cash business may not take place as early this week as it has over the past few weeks as packers may not need to be aggressive and will try to capitalize on the weakness of futures. May feeder cattle moved to the lowest level they have been since June 2, 2021, setting a very negative tone to the market.

There was nothing to stop hog futures on Friday except for the daily limit price. Thankfully, futures did not close limit down, but that was small consolation after a week of plummeting prices. June hogs fell $12.40 for the week with futures unable to find support due to lower cash, lower cutouts and futures falling below technical support. The market is oversold, but that may not mean much if traders are unable to find something to trigger short-covering and new buying interest. Support from both cash and cutouts has been elusive recently. Cash fell $2.43 Friday while cutouts were able to eke out a gain of $0.09. Traders may be very cautious beginning the week.

	BULL SIDE		BEAR SIDE
1)	June holds a significant discount to cash, which may need to be eliminated if cash holds again this week.	1)	Packers have some cattle already contracted for the next few weeks, which may leave them a little less aggressive.
2)	Large chart gaps remain above the market that may be filled over time if demand remains strong.	2)	Boxed beef prices continue to show weakness. This is a reflection of reduced demand for higher cuts of meat cutting into packer margins.
3)	Hog supplies remain tight and could become tighter as time progresses. Lower cutouts should stimulate demand, requiring packers to become more aggressive.	3)	Hog futures were unable to find support last week despite much lower prices. Technical traders seem to be in control.
4)	Hog futures are oversold, which could trigger some short-covering if traders are not able to press the downside any further.	4)	The weakness of futures on Friday may result in follow-through selling again Monday.

**

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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