DTN Early Word Livestock Comments
Traders May Position Ahead of Report, Keeping Trade Choppy
Cattle: Steady Futures: Mixed Live Equiv: $294.54 +$1.10*
Hogs: Higher Futures: Mixed Lean Equiv: $118.57 -$0.41**
*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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Cattle futures were mixed Thursday, as early indications suggest cash prices may remain steady for the week. Heavier cash trade was expected earlier this week due to the limited volume of cattle traded last week. However, packers and feedlots are waiting it out, hoping to take advantage of doing business after the Cattle on Feed report. Traders seemed to be positioning themselves ahead of the report Thursday, which should continue Friday. Some light cash cattle trade took place again Thursday at steady money as last week, but with limited volume. Boxed beef prices were higher with choice up $2.01 and select up $0.44. The estimates for the Cattle on Feed report are for on-feed numbers on Aug. 1 at 98.1% of a year ago, with estimates ranging from 97.4% to 98.6%. Placements in July expected to average 91.2% with estimates from 87.0% to 97.0%. Marketing in July is estimated at 94.1% with a range of 93.9% to 94.4%.
Hog futures could not find sufficient support to maintain the strength seen during the day. All but the October contract closed marginally higher. Traders did not have much to generate strong buying interest with both cash and cutouts lower. The National Daily Direct Afternoon Hog report was down $1.46. Pork cutout values declined $0.41. Packers may be a bit more aggressive Friday as they need to complete their purchases for the week and may bid up to accomplish it. The positive aspect of trading activity this week is that futures have been holding support. Traders have been content to hold their long positions. Weekly export sales were 9% lower than the previous week at 19,200 metric tons.
| BULL SIDE | BEAR SIDE | ||
| 1) | The Cattle on Feed report could show the lowest August inventory since 2017 if the report is released near analysts' expectations. | 1) | Cattle traders moved futures higher throughout the week and profits may be taken ahead of the report to be on the safe side. |
| 2) | A selloff is not expected ahead of the report as cattle traders seem willing to hold long positions in the expectation of a neutral to bullish report. | 2) | Once Labor Day demand for beef is filled, consumers may slow their beef purchases, resulting in lower boxed beef prices. |
| 3) | Hog futures have held support and traded in a sideways range throughout the week. The market may be building long-term support. | 3) | Hog futures have been unable to break above resistance as traders have not seen sufficient fundamentals to push prices higher. |
4) | Pork may benefit from increased demand once Labor Day is past, as consumers may back away from high-priced beef. | 4) | Packers continue to slow hog slaughter in an effort to improve their margins. This leaves sufficient hogs readily available for purchase, reducing the need to bid aggressively to obtain them. |
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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