DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $267.15 -$0.61*

Hogs: Higher Futures: Higher Lean Equiv: $111.93 -$0.64**

*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 did not see any specific fundamental change Tuesday, but futures ran out of aggressive buying and quickly turned lower. It was as if someone flipped a direction switch. Traders are becoming increasingly nervous at these price levels. Futures have not kept up with the gains in cash and boxed beef, potentially indicating the market is becoming tired. There is a hesitancy to go all in at these levels. The feeling that cash cattle may trade no more than steady this week is growing and will keep traders cautious. Boxed beef prices were lower with choice down $0.56 and select down $1.59. It has been some time since both categories of boxed beef were lower on the same day.

Hog futures had moderate changes confined to double-digit gains or losses Tuesday. Spread trading seems popular when the market provides little solid direction. The June and July contracts closed lower, while later contracts were higher. The National Direct Afternoon Hog report showed good sales activity, but no price change was reported. The weighted average price was $98.84. No prices were reported on Monday, leaving nothing to compare the day's weighted average to. Pork cutouts did not show the support that had been hoped, with values down $0.64. The August and later months posted new contract highs.

	BULL SIDE		BEAR SIDE
1)	Cattle futures closed lower due to traders' nervousness and were not fundamentally driven. Traders may buy the break.	1)	The cattle maket seems as if it may be running out of steam and is top-heavy. New highs may be difficult to achieve.
2)	Cattle futures hold a discount to cash and the correlation to boxed beef prices. Steady or higher cash could trigger increased buying interest.	2)	Boxed beef prices were lower in both categories and could be the beginning of further weakness if demand slows.
3)	The August and later hog futures continue to make new contract highs on the optimism of higher prices and stronger demand.	3)	Pork cutouts have not found solid footing this week. Retail movement has not been as strong as hoped.
4)	Packers are expected to be aggressive in the cash market Wednesday as they need hogs, having purchased very few on Monday. They need more than what was purchased on Tuesday and will be willing to bid up to obtain them.	4)	Deferred hog futures are due for a price correction as they have been consistently strong and have not taken a breather.

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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