DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $195.85 +$0.84*

Hogs: Higher Futures: Mixed Lean Equiv: $132.14 -$0.97**

*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:

Traders were cautiously optimistic in live cattle posting moderate gains partly on the ideas that packers will be more aggressive buying this week and may pay more and partly because of spillover support from the strength in feeder cattle. Feeder cattle reacted positively to lower corn prices as they usually do. Packers have some cattle already purchased ahead but strong slaughter pace may require them to be more aggressive as they were last week to stay ahead of demand. Boxed beef gained Monday with choice up $1.62 and select up $0.19. Boxed beef has had a tendency lately to see about one day of stronger prices followed by weakness. The Commitment of Traders report showed funds as net buyers of only 499 contracts bringing their net long position to 38,004.

Hogs continued to push higher Monday with August nearing a contract high close during its final week of trade. October posted a new contract high close as it begins to close the gap between it and the level of August. What is interesting is that October and December 2023 contracts closed $3.60 and $4.02 higher. Trade was light but the higher prices held into the close. The National Direct Afternoon report showed cash down $1.59. Cutouts also declined posting a loss of $0.97 after printing higher on the midday report. The pattern has been for higher cash on Tuesdays. Packers could be aggressive Tuesday as they procure hogs earlier rather than later. The Commitment of Traders showed funds as net buyers of 5,675 contracts bringing their net long positions to 45,949 contracts.

	BULL SIDE		BEAR SIDE
1)	The trend is up and there is anticipation for higher cash based on continued strong processing speeds.	1)	Cattle were higher in part due to lower corn futures. Significantly higher corn overnight might put pressure back on the market.
2)	August and October live cattle have a large price gap that may be filled just above the high Monday.	2)	With packers having some cattle forward contracted, cash may be no better than steady this week.
3)	The trend is higher for hogs with August continue to see strength as it moves toward expiration. Demand remains strong.	3)	Seasonal demand may begin to wane soon leaving later futures contacts potentially overpriced.
4)	Hog futures over $100 for June through August 2023 contracts is a testament to the support developing under the market.	4)	October hogs could see more aggressive selling as price reached near the contract high set in March. A failure to break through resistance could increase technical selling interest.

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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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