DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $195.45 +$0.29*

Hogs: Steady Futures: Higher Lean Equiv: $122.45 +$5.73**

*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:

It is concerning when cattle are not able to find support when corn futures are under substantial pressure. The gains of Friday were erased yesterday even though corn futures fell more severely. Some cash business may be accomplished today as it is already Wednesday, but packers may hold out due to having some cattle already forward contracted. So far, beef movement seems to have been less than stellar as boxed beef prices yesterday were mixed with choice up $0.84 and select down $0.60. The Commitment of Traders report showed funds as sellers of 14,877 contracts bringing their net total long positions to 24,265 contracts.

Nearby hogs were the bright spot of commodities yesterday. If your eyes got tired of seeing red, a glance at nearby hog futures relieved the pain. July and August posted triple-digit gains with support from strong cutouts. The midday report showed cutouts up $8.28 with settlement for the day with a gain of $5.73. This indicates there was good movement over the July 4^th weekend with retail outlets needing to restock. Cash was strong as packers stepped up to the plate with the National Direct Afternoon Hog report up $6.24. There is a good chance for further gains today as hogs are needed. The Commitment of Traders report showed funds are net buyers of 1,825 contracts and increased their net long position to 36,639 contracts.

	BULL SIDE		BEAR SIDE
1)	August cattle hold a significant discount to cash which should provide support if cash can hold steady to higher.	1)	The cattle complex has been unable to find strength from lower corn prices. The possibility of slowing demand seems to be the focus.
2)	The potential for lower grain prices due to good crop conditions and the outlook for good weather may give feedlots more confidence to hold for no less than steady cash.	2)	Boxed beef continues to struggle unable to find solid support even after the holiday weekend.
3)	Strong pork cutouts and higher cash yesterday should set the tone for today as demand over the holiday seems to have been strong. Packers should remain aggressive.	3)	Hogs showed heavy spread trading yesterday. At some point, those spreads will be unwound pressuring nearby months and supporting back months.
4)	Livestock traders may be turning their attention more to hogs as having more upside potential of the livestock complex moving through the inflationary period.	4)	Packers were aggressive yesterday but once they have sufficient hogs purchased for the week, cash may fall back again.

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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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