DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $252.08 -$1.38*

Hogs: Lower Futures: Higher Lean Equiv: $103.40 +$3.35**

*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:

June live cattle gained $3.58 for the week, with May feeder cattle up $3.03. Although live cattle futures closed lower in all but the June contract, new highs were made before selling pressure got the upper hand. That may change Monday as Secretary of Agriculture Brooke Rollins announced on Sunday the suspension of live cattle, horse, and bison imports from Mexico, effective immediately. The threat of the New World Screwworm has been spreading northward, moving closer to the U.S. border. Cattle futures are expected to increase on the news as fewer cattle will be available to add to the beef herd. Boxed beef prices were lower Friday with choice down $1.92 and select down $2.03. However, this may not have any impact on the market. The Commitments of Traders Report showed fund traders adding 3,118 live cattle contracts, increasing their net-long position to 125,611. They added 1,457 feeder cattle contracts, increasing their net-long position to 28,320.

Hog futures held better than cattle futures Friday with a mixed close ahead of the weekend. There is much uncertainty over demand, as there have been numerous days with mixed closes. More spread trading is taking place rather than attempting to guess market direction. The National Daily Direct Afternoon report showed cash up $0.45 with a weighted average of $94.47. Higher cash is somewhat unusual on a Friday. Pork cutouts were the shining star with an increase of $3.33. Ribs, loins, and butts showed strong gains. The Commitments of Traders report showed fund traders adding 3,621 futures contracts, bringing their long futures position to 69,351.

	BULL SIDE		BEAR SIDE
1)	The closing of the U.S.-Mexico border to cattle imports will reduce the amount of cattle available to the market and should support prices.	1)	Packers may have been able to purchase a sufficient amount of cattle ahead last week, allowing them to be less aggressive this week.
2)	The falling back from new highs in live cattle futures on Friday was likely due to profit-taking ahead of the weekend and not a change in trend.	2)	It may be difficult for demand to remain as strong as it has been after Memorial Day weekend.
	The sharp increase in pork cutouts may indicate demand is improving, moving closer to summer and increased grilling demand.	3)	Hog futures have been unable to find continued support. The strong cutout increase might not be sufficient to turn the trend higher.
4)	Hog futures are consolidating and may rebound to close the chart gaps remaining above the market.	4)	Hog supplies remain ample, leaving packers less aggressive with purchases. There is little concern about tightening supply.

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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