DTN Early Word Livestock Comments

Hog Futures Should Find Support

Robin Schmahl
By  Robin Schmahl , DTN Contributing Analyst

Cattle: Steady Futures: Mixed Live Equiv: $182.94 -$0.49*

Hogs: Steady Futures: Higher Lean Equiv: $106.88 -$1.97**

*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:

The cattle complex finally showed a positive day, but not until after futures made a lower low than Wednesday. Strong weekly export sales were responsible for the higher opening, but contracts then made a lower low before triggering some short-covering as traders stepped into the market. Weekly exports sales totaled 21,500 metric tons (mt) with China the second largest buyer. Some cash cattle traded Thursday with prices in line with the week. Southern cattle traded steady with Northern dressed cattle $1.00 lower. Boxed beef was mixed with choice down $1.47 and select up $0.57. October feeder cattle are now the front-month contract. Futures bounced nicely after technical traders bought the market. Feeder cattle auctions are not seeing higher prices this week as more animals have become available.

Hog futures tried valiantly to maintain gains after a gap higher opening. However, prices fell back into the close, eliminating the gap and posting slightly lower prices. The National Direct Afternoon Hog report showed cash down $4.93 with cutouts down $1.97, keeping some pressure on futures. The looming Hogs & Pigs report had traders more intent on limiting risk than market direction. The report was neutral to friendly to the market. All hogs and pigs were down 1% and just slightly below the trade estimate. Hogs kept for marketing were down 1% from a year ago and close in line with last year. Hogs kept for breeding was the friendliest with a decline of 1% compared to the traded estimate of 99.6%. Export sales were strong at 34,330 mt with China being the number three buyer. Saturday slaughter is estimated at 130,000 head.

BULL SIDE BEAR SIDE
1)

The gains in cattle futures Thursday might indicate a bottom may have been established for the near term.

1)

Cattle rebounded Thursday after first making lower lows. This does not indicate a change in trend but maybe just a technical bounce.

2)

Good export sales may keep beef from backing up in the market with China continuing to be a buyer.

2)

The impact of higher food prices on beef demand remains a concern with more interest rate increases to come.

3)

The Hog & Pigs report was neutral to friendly to the market as all categories showed lower actuals than the estimates.

3)

Hog futures could not hold the short-covering gains Thursday despite the upcoming Hogs & Pigs report. Traders were comfortable with their positions.

4)

Hog futures are oversold and may find short-covering into the weekend.

4)

Continued weakness of cash and cutouts is an anchor on the market.

**

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

Robin Schmahl