DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $255.68 +$0.97*

Hogs: Lower Futures: Higher Lean Equiv: $105.29 +$2.58**

*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:

Traders were intent on liquidating contracts at the beginning of the day Thursday. Feeder cattle and some live cattle contracts gapped lower on the open and continued lower. It is difficult to assess whether the liquidation will supersede the light cash trade cattle trade of $1.00 higher on Thursday. Feedlots are not willing to give up on holding cattle for higher cash, but the report is that some cattle being purchased are already for deferred delivery. If this does not pressure cash this week, it almost certainly will next week. That realization may increase sales even if cash is lower, as holding them may result in lower cash trade next week. Boxed beef prices were higher, with choice up $0.54 and select up $3.33. Feeder cattle showed "Katie-bar-the-door" liquidation with contracts falling $10.00 to $11.00 over the past two days.

Although hog futures followed cattle lower on Wednesday, they decoupled on Thursday and were able to close higher. The July and August contracts moved to the highest level they have been since mid-February. The December through April contracts posted new contract highs. The National Direct Afternoon Hog report showed cash up $1.18 with a weighted average of $94.79. Pork cutouts jumped $2.58, renewing the idea that summer pork demand will increase. Saturday slaughter is estimated at 34,000 head. Poor packer margins have reduced the desire for Saturday slaughter.

	BULL SIDE		BEAR SIDE
1)	The gaps left on the open Thursday in cattle futures should be filled at some point. Liquidation generally runs its course in 2-3 days.	1)	Liquidation of cattle futures has come with a vengeance and may not be finished. Fund liquidation generally takes place over a period of three days.
2)	Some light cash cattle trade took place on Thursday, with most of it $1.00 higher than last week. Feedlots do not seem anxious to sell.	2)	Packers may be gaining more ownership for deferred delivery, which may result in lower cash, possibly this week or likely next week.
3)	Hog futures moved higher on Thursday, with the later futures establishing new contract highs.	3)	Hog packer margins are poor and could result in reduced slaughter moving forward until margins improve.
4)	Pork cutouts have gained overall this week, indicating demand may be improving. Consumers might be increasing pork consumption due to high beef prices.	4)	Packers likely have their hogs purchased for the week with lower cash expected.

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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