DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $274.17 +1.45*

Hogs: Lower Futures: Higher Lean Equiv: $120.32 +1.42**

*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:

Cash cattle traded on Thursday, but traders were a little disappointed that Northern dressed cattle traded steady compared to last week. Southern live cattle showed more activity at $5.00 higher, but the focus was on the dressed trade and the overbought market. It isn't very likely liquidation will be triggered as boxed beef prices remain supportive and weekly export sales jumped 71% from the previous week, totaling 15,300 metric tons. Boxed beef prices were higher, with choice up $1.96 and select up $2.32. Boxed beef prices have been higher the entire week, providing support to the market. Though it looks like the market might be consolidating and could retrace, the downside might be limited. USDA increased its estimates for steer prices on the WASDE report, also providing optimism.

Hog futures closed higher in all but the August contract Thursay as traders did not see sufficient support to trigger aggressive buying. However, the October and later contracts were able to make new highs. Pork cutouts increased $1.42 to average $114.50. Unfortunately, cash was lower with the National Daily Direct Afternoon Hog report down $1.38. The low weekly export sales of only 9,700 metric tons limited traders' buying interest. China was a buyer, but of a limited quantity. The WASDE report showed USDA increasing its estimates for hog prices but reduced the estimates for pork exports. Friday is the last trading day for the June hog contract.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded steady to higher this week and should follow that pattern Friday. This is supportive to the market.	1)	Traders are becoming increasingly cautious. Fund traders could liquidate some positions to bank some of their profits as a precaution ahead of the weekend.
2)	Cattle futures seem to be consolidating rather than running out of buying interest.	2)	It has been a while since there has been steady cash trade. The market might be reaching a threshold.
3)	October and later hog futures made new contract highs Thursday, keeping the uptrend alive and well.	3)	The lower export sales report could cause concern that prices are becoming too high to maintain international demand.
4)	The strength of pork cutouts indicates good demand and should support higher prices.	4)	Hog futures are overbought and a price retracement could take place.

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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