DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $224.17 +$2.05*

Hogs: Steady Futures: Mixed Lean Equiv: $89.28 +1.06**

*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:

Higher cash cattle last week propelled live cattle futures to new contract highs. It is amazing to see strong beef demand as prices continue to rise at the retail and food service level. Consumers continue to work beef into their food budget. Tightening beef supplies keep packers needing to step up to the plate. There was a report that some packers had purchased cattle for delivery 2 to 3 weeks out and then took them for delivery a couple days later as they needed cattle. This may limit the amount of cattle that are purchased and available with time. Boxed beef was strong Friday with choice up $3.99 and select up $0.38. The Commitment of Traders report showed funds adding 2,003 long futures, bringing their net-long futures position to 101,040 contracts. Feeder cattle long positions increased by 2,085 contracts to a net long 15,987 futures contracts.

Hogs continued the freefall Friday, unable to find a bottom or even trigger any short-covering into the weekend. Cash hogs fell $3.77 on the National Direct Afternoon report to a weighted average of $75.69. The June hog contract continues to fall to keep in line with cash as the contract has about two weeks remaining to trade. It was a brutal week without any sign of support. Early weaned pigs fell to a cash weighted average of $10.05 last week and about one fourth of what they were a year ago. Pork cutouts were higher, increasing $1.01, but that may have little influence on the market. The Commitment of Traders report showed funds adding 4,702 contracts to their short positions, bringing the total net-short position total to 28,160 contracts.

	BULL SIDE		BEAR SIDE
1)	Strong boxed beef and tighter supply should continue to support the market.	1)	Memorial Day is past, and the question is whether beef demand will be able to maintain the same level it has been.
2)	Cattle are being pulled ahead that were purchased for deferred delivery, indicating packers are short-bought and could be more aggressive again this week.	2)	At some point, high prices will cure high prices and even though beef supplies are tight, demand may slow.
3)	There has been some talk of the possibility of sows being euthanized as they not being worth much along with the low prices of early weaned and feeder pigs. This would tighten supply in the future.	3)	Hog futures just cannot find a bottom and cash continues to decline. There is no indication of support.
4)	Hog futures are severely oversold and could have a price bounce moving into the end of the month.	4)	Lower hog prices are not being reflected in stores as retail prices remain higher due to increased wages, trucking, driver availability, etc. This keeps demand from improving as consumers still see higher prices.

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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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