Cattle: Lower Futures: Mixed Live Equiv: $198.05 +$0.78*
Hogs: Lower Futures: Mixed Lean Equiv: $135.41 -$1.50**
*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 have struggled to retain initial strength seen from the Cattle on Feed report with futures weakening most of last week, giving back a good portion of its gains. Traders had a tough time supporting the market when cash could not find any traction. The initial expectations this week are for further pressure on cash. Packers seem to be in a good position where they do not need to bid for supply aggressively. Increased slaughter rates are being met with sufficient cattle. Higher boxed beef prices provided some support, but they may struggle this week as well. On Friday, choice increased $1.47 with select up $1.44.
August hogs posted a banner week with price closing at the highest level since March 30. The contract has two weeks to trade and numerous chart gaps remaining below the market. It is doubtful all of the gaps, if any, will be closed before the end of the contract. Futures closed higher on momentum and not due to underlying cash or cutouts. The National Direct Afternoon Hog report showed a decrease of $2.51 with cutouts down $1.45. It may be a slow beginning to the week as the trade assesses weekend pork movement.
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Cattle futures have been able to hold well in the face of weaker cash over the past few weeks. Traders anticipate tighter supplies during the second half of the year.
Packers have not been aggressive over the past few weeks as they had some cattle forward contracted. This has not changed much, leaving them less aggressive in the cash market.
Boxed beef prices held well last week, indicating product is moving well despite higher food prices.
Traders may take a wait-and-see attitude Monday due to the uncertainty of cash for the week.
Pork cutouts have been strong with gains from week-to-week indicating good demand.
The large discount of the October hog contract indicates traders feel cash strength will not be maintained.
Hog weights continue to decline, dropping 0.8 pounds from the previous week to an average weight of 276.7 pounds. This is down 1.4 pounds from a year ago.
Packers are not expected to be aggressive Monday as they wait for indication of pork movement over the weekend.
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 firstname.lastname@example.org
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