DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $266.86 +$0.74*

Hogs: Lower Futures: Higher Lean Equiv: $110.44 +$2.22**

*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 futures have nearly recovered the losses from the fake news story of discovering the New World screwworm in the U.S. The fundamentals remain supportive with traders holding and adding to their long positions. The gains Thursday should be extended Friday as cash cattle traded higher. Southern live cattle traded $1.00 to $3.00 higher while Northern dressed cattle traded $6.00 to $8.00 higher. This should stimulate further buying interest in futures, as steady cash had been expected. Feedlots continue to hold for higher prices and have no concern over holding cattle to higher weights, as it has paid off. Boxed beef prices were higher, with choice up $0.67 and select up $1.90. Feeder cattle futures led the charge Thursday with gains of more than $4.00 in the nearby contracts. Cattle futures should see further gains in Friday's trade.

Traders were uncertain about the market's direction, leaving hog futures mixed at the close Thursday. Futures should see strength Friday as cash and cutouts were higher. The National Daily Direct Afternoon Hog Report showed cash up $0.66 from the previous day with a weighted average of $98.95. Pork cutouts jumped $2.22. The slaughter pace remains strong despite poor packer margins. Demand needs to be met, and the higher slaughter pace is moving hogs but limiting upside price movement as more pork is available to the market. There has been the anticipation of tighter supplies, but that has not yet been seen.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded significantly higher than expected this week and should support futures.	1)	Traders are becoming increasingly nervous about the high prices. Strong beef prices will not continue forever. Any negative news could trigger substantial liquidation.
2)	Consumer demand remains strong and is reflected in continuing strength in boxed beef, with prices at record highs.	2)	Cattle weights continue to increase as feedlots hold cattle for higher prices. More beef is available to the market with fewer cattle.
3)	Hog futures have regained some of the losses but have not been able to push higher. The strength of cash this week and the higher cutouts may provide the support needed.	3)	Packers have access to an ample hog supply and have not had to be aggressive with their purchases.
4)	Demand for pork is expected to improve domestically and internationally as the summer progresses. Weekly export sales are expected to show increased international interest.	4)	The August, October, and December contracts have chart gaps remaining below the market that may be filled.

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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