DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $224.66 +$0.13*

Hogs: Lower Futures: Mixed Lean Equiv: $92.76 +0.41**

*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 anticipating higher cash this week and they got more than they anticipated. Feedlots held out, increasing their asking prices as higher bids were passed during the morning. Packers finally gave feedlots what they wanted, which resulted in Southern live cattle $7.00 to $9.00 higher with Northern dressed cattle $8.00 higher. Price increases such as this are rare but an indication of the tightness of cattle supplies. With cash trading as high as it was, it was surprising live cattle futures did not move higher than they did. Boxed beef prices did not follow the exuberance, closing mixed with choice up $0.60 while select declined $0.83. Feeder cattle struggled for much of the morning before spillover trading began lifting futures. Feeder cattle have been in demand and with live cattle pushing aggressively higher, there was no holding back. Buyers are confident of higher cattle prices, keeping them paying more for feeders.

Hogs did not receive any spillover support from cattle as they are running on their own fundamentals. June hogs were higher as it needs to remain close to cash and the CME Lean Hog Index. Later contracts were unchanged to lower as the strong cash of Wednesday was factored into the market. The National Direct Afternoon Hog report showed cash down only $0.04, indicating buyers still need hogs. Pork cutouts gained $0.41, providing some support. Hog futures may see further pressure Friday as market fundamentals have not changed much. Saturday slaughter is estimated at 120,000 head. Weekly exports sales will be released Friday morning.

	BULL SIDE		BEAR SIDE
1)	Exceptionally strong cash pushed futures substantially higher with likely more to come as packers need to satisfy demand.	1)	Such sharp gains in a market generally do not hold for an extended period as long liquidation may occur if there is any weakness in the fundamentals.
2)	Tight cattle supplies may keep packers scrambling for market-ready cattle and they will need to pay up to get them. Feedlots will have the confidence to ask for more next week.	2)	Mixed boxed beef prices this week may cause packers to slow chain speed to reduce purchases and improve margins.
3)	Even though cash hogs were slightly lower Thursday, the strong price gain Wednesday was retained. This could indicate the market may have found support.	3)	Hog futures could not extend the gains Thursday as a new month saw renewed selling interest.
4)	Lighter weights may indicate hog supplies are not backed up, which may keep packers a little more aggressive through the summer grilling season.	4)	Hog futures have chart gaps below the market left from earlier this week that will likely be filled Friday or early next week.

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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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