DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $252.61 +$1.58*

Hogs: Higher Futures: Higher Lean Equiv: $101.25 -$0.96**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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 continue to establish new highs across the board at levels never seen before. The August feeder cattle contract stopped just shy of $300 on Tuesday, moving to $299.90 before slipping back. Either $300 will be a price resistance or a target level to exceed by technical traders. There may be many sell orders at that level, which could trigger some liquidation as the market is overbought, and that price could be psychological resistance. A few cash cattle were traded Tuesday, as packers may be more aggressive in purchasing cattle this week. A few trades were recorded at steady to $2.00 higher. This may indicate cash sales could be no less than steady this week. Boxed beef prices were higher, with choice up $1.10 and select up $4.90.

Packers were aggressive in their desire to purchase hogs Tuesday. The National Daily Direct Afternoon Hog report showed cash up $3.62, moving the weighted average to $93.58. One cannot really say demand is not strong due to packers maintaining a brisk chain speed, slaughtering hogs that are an average of 4 pounds higher than a year ago. The increase in demand is masked by higher volume. Pork cutouts did not fare as well, posting a decline of $0.96. Although packers purchased a substantial volume of hogs on Tuesday, they should remain aggressive Wednesday, paying higher prices to surround themselves with more hogs for the week.

	BULL SIDE		BEAR SIDE
1)	New contract highs in cattle were established Tuesday, keeping the uptrend intact. Futures are not leaving any chart gaps behind.	1)	Traders may see the $300 level in August feeder cattle as a level to liquidate long positions or as a resistance level to sell for a price retracement.
2)	Early light cash cattle trade at steady-to-higher money may set the tone for the rest of the week. Cash trade early in the week is unusual.	2)	Cattle traders have not been anxious to narrow the gap between cash and the June futures contract, believing cash prices will decline.
	The strength in cash on Tuesday should carry over Wednesday as the packers want to purchase hogs early to maintain stronger chain speeds.	3)	Traders do not seem to like the inability of pork cutouts to find continued support. Prices remain choppy.
4)	The strong slaughter pace keeps hogs current in the country, which should support the market in the long run.	4)	Even though hog slaughter remains higher than a year ago, packers have plenty of supply available, limiting how aggressive they need to be to obtain them.

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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