DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $197.09 +$0.10*

Hogs: Steady Futures: Mixed Lean Equiv: $133.86 +$1.96**

*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 were higher due to positioning ahead of the reports Friday. There was anticipation at least one of the reports would be friendly and short-covering pushed futures higher. Traders did see friendly numbers on the Bi-annual Cattle Inventory report with total inventory down 2%. Beef heifers over 500 pounds were down 3% with beef calves under 500 pounds down 3%. This was about as expected, so no real surprises there. The surprise was on the Cattle on Feed report. Placements during the month of June were at 98% of a year ago compared to the trade estimate of 94.7%. Even though on feed numbers and marketings were in line with estimates, higher placements are likely to push futures lower Monday as traders react to the actual versus expectations. Feeder cattle may go along for the ride as they follow the lead of live cattle as well as some negative influence from higher corn futures.

August hogs were the focus of the day as the index continues to increase and cutouts showed strong gains. Cutouts were up $1.84 with the lean hog index up $0.67 at $117.40. Traders may not be quite as exuberant Monday as they wait to see how pork movement was over the weekend. Packers are not expected to be aggressive for the same reason. Cash on the National Direct Afternoon Hog report showed a decline of $6.23 Friday. There are sufficient hogs around to keep packers satisfied. However, weights continue to decrease with a decline of 1 1/2 pounds compared to the previous week. The average weight for the week ended 7/16 was 277.5 pounds compared to 278.1 pounds the previous week. August hogs are riddled with chart gaps; it may be tough to close them in the current market environment.

	BULL SIDE		BEAR SIDE
1)	The Cattle Inventory report was friendly to the market and may provide some support.	1)	Higher placements than expected on the Cattle on Feed report may pressure cattle futures Monday, possibly eliminating the gains of Friday.
2)	Beef inventory for June showed a decline of 9.9 million pounds from May, indicating demand has remained strong.	2)	Total beef inventory is 29% higher than a year ago. This leaves plentiful supplies available to the market.
3)	Once hog futures penetrated overhead resistance, there was little to hold them back.	3)	Total pork in inventory is 22% above a year ago with belly stocks 46% higher.
4)	October hogs carry a huge discount to cash and may begin to make up some of the difference over the next few weeks.	4)	The sharp drop in cash hogs Friday may have a negative influence on futures trading Monday.

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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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