DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $266.12 +$1.95*

Hogs: Higher Futures: Lower Lean Equiv: $108.22 -$1.33**

*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 realized cattle are in a precarious position at these lofty levels. The volatility of futures on Tuesday, which took place on false news, was a wake-up call to what could take place if real negative news actually hit the market. The fund traders may have realized they needed to trim some of their long positions. Expanded trading limits in cattle will begin next week, which could heighten volatility. Cash has not yet traded this week, with the anticipation that cash might be no better than steady. Boxed beef was higher Wednesday, with choice up $3.57 and select up $0.91. Feeder cattle led the weakness as funds may reduce their record-long positions.

Hogs found further support Wednesday as traders turned more optimistic over demand. The slaughter pace is strong as packers make up for the holiday weekend. The change in price on the National Daily Direct Afternoon report was not released because there was no price posted Tuesday to compare it to. The average price was $98.29, which is $3.83 higher than the price posted Friday. Pork cutouts did not provide support with values down $1.08. Weekly hog weights showed little change. Cash may be higher Thursday as packers need to obtain the hogs they need to finish out the week and make up for the holiday.

	BULL SIDE		BEAR SIDE
1)	The recent weakness in cattle futures was the result of fake news. The weakness may be viewed as a buying opportunity as traders regain their confidence.	1)	Cattle traders may reduce more of their long positions ahead of the increased trading limits and higher margin requirements.
2)	The strength of boxed beef prices indicates demand remains strong, and packers will need cattle to meet that demand.	2)	If cash cattle trade lower this week, further liquidation could be triggered.
3)	Hog futures may regain last week's losses. The optimism of traders over improved demand seems to have returned.	3)	Weekly hog weights increased 0.1 pounds, averaging 288.0 pounds, the same level as a year ago.
4)	Pork cutouts are expected to find support and trend higher as the summer progresses.	4)	Technically, hog futures are neutral and could go either way. Futures may drift sideways into the weekend.

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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