DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $274.84 +0.67*

Hogs: Higher Futures: Higher Lean Equiv: $123.92 +3.60**

*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 came under substantial pressure Friday, which mounted as futures moved lower and stops were triggered. Contracts were under pressure from the opening bell, with all but the June live cattle contract closing the chart gaps that had remained below the market. The March feeder cattle contract also closed a gap. However, the negative reaction at the beginning of the day left some gaps at the open. The negative technical aspect is that traders were not content to close the chart gaps but pushed contracts significantly lower. Follow-through selling may be expected Monday. Cash cattle traded steady to $5.00 higher as they had earlier in the week, leaving little negative fundamentals. However, traders seemed to focus on the steady cash trade for live cattle that had not been seen for eight weeks. Boxed beef prices were higher, with choice up $1.16 and select up $0.43. The Commitment of Traders showed fund traders bought 6,990 live cattle contracts, moving their net long position to 131,728 contracts. Fund traders added 985 long positions to feeder cattle, taking their long position to a record 34,624 contracts.

Hog traders were undecided as to the direction of the market Friday. The June contract ceased trading, with July taking over as the lead-month carrying a premium to June. The large jump in pork cutouts on Friday should provide support, as it indicates strong demand. Cutouts jumped $3.56 with values closing at $118.06. Cutouts have been increasing over the past few weeks. Cash was $1.00 lower on the National Daily Direct Afternoon Hog report at $104.95. Packers may be aggressive early in the week as demand improves and market-ready hog numbers seem to be tightening. The Commitments of Traders report showed fund traders adding 15,769 contracts, bringing their net-long position to 112,798 contracts.

	BULL SIDE		BEAR SIDE
1)	Chart gaps were closed on the weakness in cattle futures on Friday. This may provide traders with the confidence to buy into the weakness.	1)	Liquidation generally runs a course of 2 to 3 days. The weakness of cattle futures is likely to continue Monday as the market corrects from being overbought.
2)	Cash cattle were steady to $5.00 higher last week, and the boxed beef price increased. This should provide further support to the market.	2)	Steady cash trade last week for live cattle sent up a red flag. Traders felt this may indicate that price resistance has been reached.
3)	Pork cutouts jumped on Friday, indicating strong demand. Demand is expected to continue through the summer.	3)	Pork packer margins are poor. This may have packers reducing slaughter to improve cutouts and attempt to back up hogs in the country.
4)	The fund traders added to their long positions as they have confidence in the market. Both cash and cutouts have been trending higher.	4)	Hog futures may move in a sideways range for a time as traders hold long positions but assess further upside potential.

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Editor's Note: Get ahead of the herd with the latest insights on the cattle market's changing cycle. Join us on Tuesday, June 24, from 10 a.m. CDT to noon for an in-depth analysis of how weather patterns, trade disruptions, and drought are reshaping the beef industry's traditional 10-year cycle. Oklahoma State University Livestock Marketing Specialist Dr. Derrell Peel shares what the cowherd of the future will look like, while DTN experts share details on weather conditions for forage and pastures, hay market dynamics and what it all means for fat and live cattle prices. Register for free here: https://dtn.link/… .

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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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