DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $274.49 +$0.13*

Hogs: Lower Futures: Mixed Lean Equiv: $103.78 -$1.63*

*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:

You can take your pick on what the negative influence on the cattle market was Wednesday. The uncertainty of the Mexican border reopening, as mentioned by the president again. The controversy surrounding the funding of SNAP of which is now to be funded to some extent. The Supreme Court began reviewing the legality of Trump's tariffs with the probability of the tariffs surviving being not very good. Fund traders do not like an excessive amount of uncertainty and pulled the plug on more long positions. However, futures limit-down prohibited further liquidation, which may carry over to Thursday. The damage has been done and cattle prices will have difficulty regaining the losses. Packers will use the pressure on futures to their advantage and bid lower for cattle. Some light trade on Wednesday was lower, pointing to lower prices this week. Boxed beef prices were mixed with choice up $0.68 and select down $1.00.

Hogs were treading water Wednesday, resulting in a mixed close. Packers were more aggressive with the National Dairy Direct Afternoon Hog report up $1.29 on a good number of hogs traded. Unfortunately, pork cutout values declined $1.63. Hog slaughter remains strong and higher than the previous week and year, indicating good demand. Hog weights continue to increase, with the average weight last week of 291.6 pounds. The bearish fundamentals continue to be reflected as futures make lower lows.

	BULL SIDE		BEAR SIDE
1)	Tight cattle supplies are a bullish factor and will remain that way for some time.	1)	Cattle futures will have expanded limits Thursday and with traders unable to liquidate on Wednesday, further selling will pressure the market.
2)	Once the uncertainty surrounding the cattle market subsides, futures may rebound substantially.	2)	Feedlots may lower their offers in an attempt to move cattle as quickly as possible before cash prices erode further.
3)	It sounds like a broken record, but hog futures are extremely oversold and should retrace at some point.	3)	Lower lows in hog futures maintain the bearish grip on the market. Traders see no reason to short-cover.
4)	Demand for pork is good with packers needing to process more hogs to keep up with it. This should reduce the supply of market-ready hogs.	4)	Weekly hog weights increased 0.4 pounds last week to an average of 291.6 pounds. This is 5.8 pounds above a year ago.

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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