DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $268.42 -$1.12*

Hogs: Higher Futures: Mixed Lean Equiv: $118.17 -$1.30**

*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 continue to struggle. The gains in futures recently are short-lived. It is too early to tell whether the market topped, but it gives the indication both technically and fundamentally that it has. Boxed beef prices continue to exhibit weakness, with choice down $0.75 and select down $3.55 Monday. Weakness in boxed beef has been nearly a daily occurrence over the past few weeks. That may continue to put pressure on cash cattle as packers are unwilling to bid up to purchase supplies. Feedlots may need to move heavier-weight cattle before prices erode further, which may result in lower cash prices again this week. Packers have been strategically reducing slaughter and purchasing cattle for deferred delivery, putting them in the driver's seat for the time being.

The hog market suffered in both the cash market and the cutouts Monday. But even with that, futures held up well with deferred contracts being able to remain positive into the close. The National Daily Direct Afternoon Hog report showed a decline of $0.74. This broke the pattern of the past few weeks when cash was higher on Monday. Packers are expected to be more aggressive Tuesday, as they did not purchase a large number of hogs on Monday. Pork cutouts declined $1.30, taking away some of the gain from Friday. Overall, hog futures seem to be supported and in an uptrend. Consumers may be shifting from high-priced beef to pork.

	BULL SIDE		BEAR SIDE
1)	Consumers continue to prefer beef and the recent weakness may be seasonal and not due to high prices.	1)	Cattle futures could not hold the gains of a week ago, indicating traders may sell price rallies.
2)	The cattle herd is showing limited signs of rebuilding. The dryness that has developed in some areas may result in the further reduction of already tight supplies.	2)	The weakness of boxed beef prices may keep pressure on the market, and packers may hold back on aggressive buying.
3)	The June, July, and August hog contracts made new highs Monday, keeping the uptrend intact and optimism alive and well.	3)	Hog futures are somewhat overbought, which could trigger profit-taking at any time.
4)	Packers should be aggressive Tuesday as they need to procure hogs to maintain the higher slaughter pace and meet demand.	4)	The supply of hogs is plentiful and weights have been increasing. This may keep cash prices in a range with limited upside potential.

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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