DTN Early Word Livestock Comments
Hog Futures May Remain Sideways Ahead of Hogs & Pigs Report
Cattle: Lower Futures: Higher Live Equiv: $285.30 +$1.16*
Hogs: Higher Futures: Mixed Lean Equiv: $128.64 +$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.
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Feeder cattle futures followed the direction of the Cattle on Feed report, closing higher Monday. Live cattle traders were not convinced the market is in a position to see much upside strength for now, as lower cash last week and the anticipation of lower cash this week is evidently on traders' minds. Packers may have finally positioned themselves so they do not need to bid aggressively to purchase cattle. They had purchased quite a few cattle ahead for deferred delivery, which puts them in a position to be less aggressive in their bid for cattle. Boxed beef prices were mixed, with choice down $0.28 while select soared $6.15. Feeder cattle closed higher, but futures lacked commitment. Feeder cattle prices in the country seem to be wavering and potentially near a threshold. The Commitments of Traders report showed fund traders as net sellers of 1,423 contracts in live cattle, reducing their net-long futures position to 130,305. They reduced their long position in feeder cattle by 31 contracts, to a net-long position of 34,593.
Hogs found support Monday with contracts closing at new highs. Demand continues to underpin the market. Packers were not aggressive Monday, with the National Daily Direct Afternoon Hog report showing cash down $1.11, but they purchased a limited volume of hogs. They will likely be more aggressive Tuesday and pay higher cash. Pork cutouts gained $0.64 and continue to advance, indicating strong demand. The Quarterly Hogs & Pigs report will be released Thursday, with estimates yet to be released. It is too early to see traders position themselves ahead of the report. The Commitments of Traders report showed fund traders increasing their long position by 12,442 contracts to a net-long of 125,240.
| BULL SIDE | BEAR SIDE | ||
| 1) | The Cattle on Feed report was supportive to the market and should limit any futures price retracement. | 1) | Live cattle futures could not close higher after the friendly Cattle on Feed report. The market may be running out of steam. |
| 2) | Boxed beef prices continue to show surprising strength, indicating consumers have not backed away from high-priced beef. | 2) | Cash cattle trade is expected to be lower as packers have been able to surround themselves with more supplies. |
| 3) | Hog futures closed at new contract highs as consumer demand is strong and packers remain aggressive despite poor margins. | 3) | Hogs may trade mixed ahead of the Hogs & Pigs report. The market is overbought, and traders may trim some of their long positions. |
4) | There is some anticipation of the Quarterly Hogs & Pigs report being friendly to the market. Average trade estimates have yet to be released. | 4) | Chart gaps remain below the market in the July and August contracts. These may be filled before or after the report Thursday. |
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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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