DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $212.36 +$0.72*

Hogs: Higher Futures: Mixed Lean Equiv: $95.61 -$0.43**

*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:

Cattle futures could not find support Tuesday as it appears this could be another week of steady cash. Feedlots may have lost temporary control over the ability to hold for higher prices. Packers have been able to work supplies to their advantage. This certainly does not indicate the highs are in as the overall fundamentals of the market have not changed. It is a combination of a pullback of boxed beef prices, futures moving too high too fast, and the upcoming Cattle on Feed report. Boxed beef prices were higher Tuesday with choice up $1.05 and select up $0.94. There have not been very many days over the past weeks in which both categories of boxed beef have been higher. Traders are expected to remain cautious Wednesday.

Hog futures spent very little time in positive territory Tuesday. Cash was higher as the National Daily Direct Afternoon Hog report showed a gain of $2.71 and could provide some support to the market Wednesday. However, cutouts being down $0.43 leaves a negative taste in the mouth of traders. Demand just has not been strong enough to keep cutouts trending consistently higher. Packers may remain somewhat aggressive Wednesday to procure much of the hogs needed for the week.

	BULL SIDE		BEAR SIDE
1)	Cash cattle are not expected to trade any worse than steady, which should provide support to the market. Supply will continue to remain tight for a time.	1)	Live cattle futures have declined nearly $4.00 from their highs over the past two weeks. Traders are anticipating a decline in cash.
2)	The upcoming Cattle on Feed report is expected to show bullish numbers continuing the trend of tighter supply.	2)	June live cattle futures closed the chart gap Tuesday, but then fell back as the day progressed.
3)	The Commitments of Traders report from three weeks ago showed funds moving back to a net-long futures position in hogs. They could have increased those positions, but without the report being up to date, we can only speculate on that.	3)	Hogs have not been able to find consistent fundamental support under the market.
4)	There is a strong potential cash hogs will be higher again Wednesday as packers need to maintain slaughter pace.	4)	Market-ready hogs continue to be available with packers having little difficulty obtaining what they need to maintain slaughter pace.

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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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