DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $267.05 -$0.10*

Hogs: Higher Futures: Higher Lean Equiv: $112.44 +$0.51**

*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 reversed the losses of Tuesday and then some with some live cattle contracts closing at record highs. It was anticipated cash might not increase this week, but that expectation was put to rest Wednesday as cash castle traded $3.00 to $6.00 higher in the South. Even though the activity was light, it likely set the stage for higher cash this week. Feedlots will certainly hold for higher cash, seeing that packers paid higher prices already at midweek. Boxed beef prices have taken a breather so far this week, with prices mixed Wednesday. Choice was $0.28 lower with select up $0.20. Feeder cattle futures did not make new highs but did maintain the recent uptrend, keeping pace with live cattle. Record-high cash cattle prices will keep feeder cattle in demand and at higher prices.

The August and later hog contracts continue to make new contract highs. The aggressiveness of packers provided the confidence for traders to remain buyers. The National Daily Direct Afternoon Hog report showed cash up $4.21 and a weighted average price of $103.05. Cash is expected to be higher Thursday as packers purchase more hogs for the week. Further support will come from cutouts increasing by $0.51. The average hog weights increased slightly from the previous week, but are below a year ago. Hog weights are likely to decline during the summer, which may result in packers being more aggressive to maintain the volume of pork needed to supply demand.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures closed at new contract highs Wednesday, renewing the uptrend. This may provide confidence to traders to add to long positions.	1)	Cattle futures may hold a discount to cash as traders remain cautious over continued upside potential.
2)	Light cash cattle trade took place at higher prices, potentially setting the stage for the rest of the week.	2)	Beef prices for both the retail and food service industry are very high, and may find consumer resistance at these levels.
3)	August and later lean hog contracts continue to establish new highs, supporting the market uptrend.	3)	Pork cutouts have yet to find that stability needed to sustain the uptrend hog futures have shown.
4)	Weekly hog weights averaged 288.3 pounds, 2.1 pounds below a year ago. It has been quite some time since weights were below the previous year.	4)	Weekly hog weights increased 0.3 pounds for the previous week. Producers have better technology and facilities that may maintain hog weights.

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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