DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $265.85 -$0.23*

Hogs: Lower Futures: Mixed Lean Equiv: $108.37 +$0.21**

*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:

Any weakness in cattle futures is very short-lived and has recently been confined to intraday activity. The bullish mindset is firmly set and it may take a monumental event to change that. Some light cash traded at $4.00 to $5.00 higher for live and over $7.00 higher for dressed cattle in the North. Southern trade has not developed. The light trade may set the stage for cash Friday, but the majority of the trade may not be done at those levels. Beef packer margins are poor with the margin down to the level it was in May and near the low for the year. Boxed beef prices slipped on Thursday with choice down $0.37 and select down $0.23. That will have little impact on the market. The tight supply of feeder cattle continues to underpin the market. This will not change anytime soon and will keep prices strong. President Trump stated on Thursday they are working on the high beef prices and prices will be coming down soon. No details have been released, but it could result in some liquidation.

Hog futures continue to have difficulty finding support. Traders have not aggressively bought the break as the fundamentals do not support a price retracement. Cash hogs were lower on Thursday, with the National Daily Direct Afternoon Hog report down $1.95. Packers do not need to be aggressive with their purchases, with market-ready hog supplies being readily available. Pork cutouts showed some strength with a gain of $0.21, but nothing that will turn the trend higher. There is a good chance there could be some short-covering ahead of the weekend, but that may be limited.

	BULL SIDE		BEAR SIDE
1)	New contract highs in live cattle maintain trader confidence in continued strong prices.	1)	Cattle futures may take a breather into the weekend as traders may bank some profits.
2)	Cash cattle are expected to trade higher with light trade late on Thursday, indicating the potential for strong gains.	2)	The statement by President Trump on beef prices could have some impact on the market as traders may liquidate due to uncertainty.
3)	Hog futures are oversold and could bounce into the weekend.	3)	Hog futures have been unable to find support from cash and cutouts. This has kept pressure on the market.
4)	Chart gaps remain above the market from earlier this week in hog futures. Chart gaps are generally filled.	4)	Heavier hogs result in a large supply of pork available to the market. Higher slaughter and heavier hogs satisfy increased demand.

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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