DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $197.69 +$0.55*

Hogs: Steady Futures: Higher Lean Equiv: $130.18 +$3.49**

*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:

With cash cattle lower for the week and a seasonality of weakness for boxed beef prices, live cattle may have a difficult time finding solid footing Monday. However, seasonality is something that seems to be lacking in many markets and cattle may not be the exception. Pressure could be more prominent due to high inflation or beef prices might be in line with consumer demand, leaving the market stable. The availability of cattle and cattle weights may be the greater influencing factors. Slower demand with less beef might keep prices supported. Grain prices will have a large influence over the next month. Cash is called steady to lower this week.

Hogs had an impressive last week with cutouts higher each day. Cutouts on Friday were up $3.67. Demand seems to be improving with the possibility of August futures needing to increase to move closer to where July went off the board Friday. There is a significant discount already factored into the market through December. Cash did not exhibit the same strength on Friday as cutouts with the National Direct Afternoon Hog report showing a decline of $1.46.

	BULL SIDE		BEAR SIDE
1)	Cattle weights are decreasing and hot weather over the next few weeks may take off more pounds. It takes more cattle for the same tonnage.	1)	Packers have some cattle already contracted ahead, which may leave them less aggressive again this week. Cash is expected to be steady to lower as a result.
2)	Live cattle futures have a large price gap from April 15 that may be closed at some point if the usual technical patterns are followed.	2)	Feeder cattle may feel further pressure due to higher grain prices to begin the week.
3)	Higher pork cutouts each day last week indicate strong demand. This may carry over into this week keeping the trend higher.	3)	Packers generally do not bid higher for hogs on Monday as they wait to see the level of product movement over the weekend before planning the rest of the week.
4)	August hogs carry a significant discount to cash and the index.	4)	August hogs have formidable price resistance above $110.50 that has not been able to be surmounted. Technical traders continue to sell at that level.

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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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