DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $266.99 +$0.56*

Hogs: Higher Futures: Mixed Lean Equiv: $123.50 +$0.30**

*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 closed lower Thursday as anticipated with traders positioning ahead of the reports. Both the Cattle on Feed report and the bi-annual Cattle Inventory report will hold significant importance. Analysts estimate cattle on-feed numbers at 99.1% of a year ago, with a range of 99.0% to 100.0%. Placements are estimated to average 98.1% with a range of 96.8% to 101.0%. Marketings are estimated at 96.1% with a range of 95.9% to 96.9%. The bi-annual Cattle Inventory report will show inventory as of July 1. Due to the report having been discontinued last year, the numbers will be compared to two years ago. The estimates are for all cattle and calves at 98.1%. Beef replacement heifers are estimated at 97.0% with a range of 95.4% to 100.0%. Dairy replacement heifers at 100.6% with a range of 98.5% to 102.9%. The annual calf crop is estimated at 97.8%. A light volume of cattle traded on Thursday at $1.00 higher, likely setting the stage for the week. Boxed beef prices closed higher with choice up $0.57 and select up $1.61.

Hog futures continue to consolidate. The fundamentals support the market, but traders are uncertain whether that support will continue. Pork cutout values are more consistent than the cash market. Cutouts increased $0.30 to $117.54. The National Daily Direct Afternoon Hog report showed packers pulling back further, with cash down $1.36. Although packers have purchased quite a few hogs this week, they may bid higher to fill their needs for the week. Packers continue to hold back on slaughter in an attempt to improve margins.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report may not have much influence on the market if it is a negative report. We have seen negative reports over the past year, but cattle futures continued to increase after a brief pause. This report may be no different.	1)	Either of the two cattle reports Friday could show negative numbers, which could cause some liquidation next week.
2)	The bi-annual Cattle Inventory report is not expected to show increased heifer retention, indicating the beef herd has not been rebuilding.	2)	Further selling may take place in cattle futures Friday as traders position ahead of the report.
3)	Hog futures continue to consolidate and may be building solid support. Traders seem confident holding long positions.	3)	If hog futures are unable to maintain support after consolidating, another period of liquidation could unfold.
4)	Overall, pork cutouts are holding well, indicating demand is good. Pork demand is anticipated to remain strong for the third quarter.	4)	Packers have been reducing slaughter due to tight margins. This will keep sufficient hogs available to the market.

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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