DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $237.18 +$2.36*

Hogs: Steady Futures: Mixed Lean Equiv: $92.24 +$0.17**

*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 pressure on cattle was totally surprising from a fundamental standpoint but not from a technical standpoint. Fundamentally, packers stepped up very aggressively again to purchase cattle, paying $3.00 to $5.00 higher for live cattle in the North and as much as $10.00 higher for dressed cattle. Southern trade remained very light as packers and feedlots are at a standoff. So why did cattle futures plummet? That is difficult to determine when futures have reached these lofty levels. Maybe bullish traders were watching the Superior Livestock Auction Corn Belt Classic sale, leaving bearish traders with the upper hand. Technically, the market needed to correct from its overbought status, but with strong cash and boxed beef stronger again with choice up $3.79 and select up $2.12, there was no fundamental reason for the decline. If there is follow-through Thursday, it would be surprising -- and also concerning.

It was not surprising hogs were under pressure Wednesday as the sharp decline of cutouts Tuesday was more of the focus than stronger cash. The National Direct Afternoon Hog report showed cash up $0.98 as packers needed to finish out their purchases for the week. Cutouts should provide some support with a small gain of $0.17, but the recent large futures price increases might be too much to maintain. Futures might be on their way down to close chart gaps remaining below the market. Weekly export sales will be important to keep the recent rally alive.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded substantially higher for the second week as supplies are tight and packers aggressive.	1)	Sometimes futures move ahead of current market fundamentals as traders anticipate price direction. The large price increases in cattle may be near a level at which demand may be impacted.
2)	Feeder cattle continue to see higher cash at auctions on a weekly basis as ever-increasing live-cattle prices provide support.	2)	Weekly export sales of beef may reflect these loft prices with a slowing of international demand.
3)	Packers have turned much more aggressive to purchase hogs, indicating numbers may have tightened and/or demand may be increasing.	3)	Hog weights increased 2 pounds last week at an average of 283.8 pounds.
4)	Funds may be trimming some short positions as the market may have been overdone to the downside.	4)	The weakness Wednesday in hog futures might have technical traders push to close the chart gaps below the market.

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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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