DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $197.47 -$0.12*

Hogs: Steady Futures: Higher Lean Equiv: $120.16 +$0.69**

*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:

higher yesterday. Feedlots were resolved to hold out for no less than steady cash. There should be quite a bit of activity today as it is the end of the week and packers still need cattle. Boxed beef was mixed which does not sit well with packers having to pay higher money. Choice was up only $0.02 with select down $0.35. August live cattle futures just are not interested in reducing the discount it is holding to cash. Concern over demand is on the minds of traders. Feeder cattle were under pressure mainly due to the rebound of corn prices yesterday. Weekly export sales will be released today providing something for traders the ponder.

Hog futures showed gains yesterday with August leading the way for a period of time. However, the contract closed over $2.00 off its high by the end of the day as it could not hold above technical chart resistance. Cash fell back with the National Direct Afternoon hog report showing a loss of $3.17. A decline was not unexpected as it seems there are only two days of strong cash each week and those were Tuesday and Wednesday. Cutouts were supportive posting a gain of $0.69. Saturday slaughter is estimated at 122,000 head.

	BULL SIDE		BEAR SIDE
1)	Steady to higher cash this week should provide support to futures today.	1)	Cattle futures are having a difficult time finding sufficient strength to break out of the sideways trading range.
2)	August continues to hold a steep discount to cash. Steady to higher cash this week may result in the contract trimming some of the discount as it will need to converge.	2)	Cash strength may be limited as consumer demand may slow if inflation continues its current path. Some industries are indicating there could be layoffs as demand for certain products declines.
3)	Hog futures had an impressive week eliminating the losses of the previous two weeks. Futures are poised to move and hold above chart resistance.	3)	Chart gaps remain below current futures prices in hog contracts. These gaps may be filled sooner rather than later.
4)	Pork cutouts have made an impressive gain from a week ago indicating strong demand over the holiday and the need for retailers to restock shelves.	4)	Hog weights are declining but there still are sufficient hogs available to satisfy the demand of packers leaving them less aggressive much of the week.

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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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