DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $197.22 -$0.25*

Hogs: Steady Futures: Mixed Lean Equiv: $122.71 +$2.55**

*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 futures just could not generate any excitement from traders Friday. One reason was cash trading was done for the week with little reason to expect any change. Another reason was the substantial increase of corn futures again as the focus has turned back to weather. The final reason is that weekly export sales were a disappointment. This left trades with little reason to buy into the market more aggressively. Feeder cattle showed heavier losses. The strength of corn overnight may put more pressure on feeder cattle, which may spill over to live cattle. Export sales were low at 11,000 metric tons (mt). Boxed beef prices were lower with choice down $0.18 and select down $0.73. Higher cash may be tough to obtain this week.

Hog futures made some impressive gains this past week, but futures were unable to close above resistance. July futures will go off the board this Friday with August holding a discount of over $3.00. Demand will need to remain strong to hold August where it is or to break out above chart resistance. Weekly exports were good, but not great, at 31,200 mt. However, China was a significant buyer as they continue to emerge from COVID lockdowns. Cash on Friday was not supportive with the National Direct Afternoon report showing a loss of $2.00. This was offset by the gain in cutouts of $2.34.

	BULL SIDE		BEAR SIDE
1)	The downside potential for live cattle may be limited due to the discount futures hold to cash. Lower cattle weights may keep buyers aggressive as they need more cattle.	1)	Corn futures are pushing higher again as weather is a focus and the potential of a further deterioration of the crop. Feed prices are again increasing.
2)	Beef supply is expected to tighten as time progresses, which should support later contracts as current futures indicate.	2)	Cash cattle are initially expected to trade no more than steady with last week. Packers may use the higher corn price to their advantage by holding back on bids.
3)	Hog futures made impressive gains last week, fueled by the strength of cutouts and a strong slaughter pace.	3)	Hog futures have not been able to close above chart resistance. Technical traders are seeing this as a level to take profits and sell into the market.
4)	China was back in the market buying pork. This is supportive to exports and may keep export demand on a good pace.	4)	Store shelves may be restocked after the holiday, and it will be up to regular demand to maintain cutout values. Any slowing of demand will impact the market negatively.

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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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