DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $198.64 -$1.278*

Hogs: Lower Futures: Lower Lean Equiv: $132.37 -$0.75**

*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:

The few cattle that traded Tuesday provided hope cash would be no worse than steady with last week. However, trade unfolded Wednesday $2.00 lower, dashing the hopes for any further gains this week. More business needs to be done yet this week, but the tone has been set. Boxed beef fell back Wednesday with choice down $2.04 and select down $1.48. Feeder cattle could not capitalize on the weakness of corn. Traders were cautious about pushing the market too much in relation to live cattle ahead of the Cattle of Feed report, even though there remains strong demand for feeders at the auctions. Estimates for cattle on feed as of July 1 are 101.1%; placements 94.7%; marketings 102.0%.

Hogs closed higher across the board Wednesday with nearby months leading the charge. The market was supported from strong cash and cutouts on Tuesday and strong cash Wednesday. The National Direct Afternoon Hog report showed price up $7.19. This, added to the strong gain Tuesday, resulted in an impressive gain of $23.25 over the past two days. That might be it for the week as price weakness is expected as packers likely have purchased much of what they need. Cutouts were down $0.75. Saturday slaughter is estimated at 42,000 head.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures already had cash weakness factored in, which should maintain the sideways trading pattern.	1)	Packers are able to continue to purchase needed cattle and contract for a few weeks ahead. This leaves them less aggressive in the cash market.
2)	Lower corn futures may provide some support to the cattle complex.	2)	Feeder cattle have chart gaps that need to be closed below the market and may be filled prior to the Cattle on Feed report Friday.
3)	Cash hogs have shown impressive strength this week with August quickly eliminating the discount it had been carrying.	3)	Weekly export sales of pork need to be good or futures could fall back. Pork not exported means more pork is available for domestic consumption.
4)	Cutouts continue to trend higher, a testament to strong consumer demand. Hog numbers may be tightening, resulting in packers needing to be more aggressive.	4)	Cash hogs are expected to drift lower the rest of the week. Packers generally bid higher two days of each week and those two days have been accomplished.

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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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