DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $234.82 +$4.13*

Hogs: Steady Futures: Mixed Lean Equiv: $92.07 -$4.08**

*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:

There has been no slowing of the climb of cattle futures. Even though the market is overbought and prices extremely high, traders continue to buy futures aggressively as underlying cash supports higher prices. It seems as if packers are trying to outbid each other in the attempt to purchase available cattle. If one passes on an offer, another packer will step in and purchase. There was some light trade in Texas yesterday at $182, which is $2.00 higher than last week. Some dressed cattle sales took place in Nebraska at $300. June cattle futures are just trying to keep up with cash and dragging the other contracts along with them. Boxed beef prices were extremely strong with choice up $7.21 and select up $2.71. Feeder cattle seem to be a bit more reluctant to move higher but are gaining out of necessity to remain in line with live cattle and with demand. Buyers continue to look aggressively for feeder cattle.

Hogs continue to show impressive gains and are leaving chart gaps in their wake. Traders may have a tug of war Wednesday as there was strong cash paid Tuesday for hogs, yet cutouts fell substantially. With the strong buying interest by packers, it is possible they have purchased much of what they need for the week, which would have them less aggressive today and maybe the rest of the week. The National Direct Afternoon Hog report showed cash up $6.84 to an average of $92.13. The index is now at $81.21. Cutouts suffered Tuesday with values down $4.08. Generally, the trade will reflect cutouts on the following day. There is some belief the implementation of Prop 12 may be delayed, providing more time for the industry to adjust.

	BULL SIDE		BEAR SIDE
1)	There is no ceiling for cattle prices with early indications packers will be aggressive again this week.	1)	At some point, the market will be overdone to the upside and prices will correct. High prices will eventually cure high prices.
2)	The impressive gain in boxed beef Tuesday indicates demand remains strong. Consumers continue to prefer beef and make it a part of their diet.	2)	Historically, markets generally fall faster than they increase. That is just something to keep in mind.
3)	Packers are looking for hogs aggressively, indicating market-ready supplies might have tightened along with lower weights.	3)	Hogs left another chart gap after the strong opening Tuesday. There are now two gaps beneath the market that may be filled.
4)	Hog futures were oversold and overdone to the downside. Short-covering has taken place as funds lighten up on some positions propelling the recent gains.	4)	The large drop in cutouts Tuesday may indicate pork supplies have been replenished at the retail level.

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Join us Friday at 11 a.m. CDT for coverage of the June WASDE report. At 12:30 p.m., DTN Lead Analyst Todd Hultman will review details of the report in his monthly webinar. You can sign up for that webinar here: https://www.dtn.com/…

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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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