DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $253.46 -$0.10*

Hogs: Lower Futures: Mixed Lean Equiv: $100.05 -$1.04**

*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:

Both live cattle and feeder cattle futures moved to new contract highs Thursday after taking a breather Wednesday. Support stemmed from Southern cash cattle trading $1.00 to $2.00 higher while Northern dressed cattle traded $6.00 higher. Packers were unable to surround themselves with sufficient cattle last week and likely are in the same position this week. Packers have been slowing the slaughter pace to hopefully back up cattle and improve margins, but that has been to no avail. Beef prices continue to surge higher as demand remains strong. Boxed beef prices were mixed on Thursday, with choice up $1.47 and select down $0.80. This will have little impact on traders as the trend remains up. The negative aspect of the market is that weekly export sales were dismal at only 7,600 metric tons (mt), down 41% from the previous week. The high prices and tariffs are having an impact on international demand.

Hog futures closed mixed, with traders continuing to search for market direction. The National Daily Direct Afternoon Hog report showed cash up $1.00 as packers needed to purchase more hogs to fulfill their slaughter needs. However, that was offset by pork cutouts declining $1.04. It has been difficult for both cash and cutouts to move consistently higher. The slaughter pace remains strong, indicating good demand. The July contract was able to close above $100, which has been a level that has been difficult to hold. Saturday slaughter is estimated at 38,000 head.

	BULL SIDE		BEAR SIDE
1)	New contract highs supported by increasing cash will give traders the confidence to increase their long positions.	1)	Low export sales may indicate international demand is slowing as beef is becoming too expensive. This will leave more beef available to the domestic market.
2)	Packers may not purchase many cattle for deferred delivery due to the higher cash needed to be paid again this week.	2)	The August and September feeder cattle contracts closed above $300 for the first time. It may be difficult to hold that level as it may trigger some profit taking and increased selling.
3)	Hog futures have chart gaps above the market that remain from earlier this week that will most likely be filled.	3)	Pork export sales were 24% lower than the previous week, with China remaining out of the market.
4)	The higher beef prices move, the greater the possibility that more demand will be switched to pork as consumers look for a less-expensive alternative.	4)	July and later hog futures contracts have been holding and consolidating, building support. Pork demand should increase during the summer.

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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