DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $290.04 -$1.98*

Hogs: Lower Futures: Higher Lean Equiv: $105.65 +$0.76*

*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:

Traders were not able to find any specific fundamental reason to support cattle futures. Cash has not traded sufficiently to provide solid direction for the week. Early strength on Thursday waned as traders could not find support. Fundamentally, cattle supplies are tight, but that is old news. If demand slows, it will not make any difference that supplies are tight. The slaughter pace is lower, but cattle weights are higher. This results in a steady beef supply despite the lower pace. Boxed beef prices have decreased since early in the week. On Thursday, choice boxed beef declined $2.40, with select down $3.71.

Hogs closed moderately higher, except for the June and July contracts. There was no solid fundamental reason for futures to move higher, as packers remained unaggressive in the cash market. The National Daily Direct Afternoon Hog report was down $1.00. It is uncertain whether packers will need more hogs to finish out the week. It was expected that they would increase slaughter to make up for the holiday-shortened week, but that does not seem to be the case. Pork cutout values were up $0.76, but that will have a limited positive impact on the market today. Weekly hog weights averaged 291.1 pounds.

	BULL SIDE		BEAR SIDE
1)	If the cash cattle trade is no worse than steady, futures are likely to increase as there is a significant discount to cash.	1)	Cattle futures have had difficulty holding gains as traders are concerned about the ongoing beef demand.
2)	There remains a strong demand for feeder cattle, with feedlots paying a premium for animals to put on feed.	2)	Packers may remain unaggressive in the cash market today, which may result in lower cash cattle trade.
3)	Hog futures remain oversold and should see further short covering to correct the market.	3)	Other than hog futures correcting from being oversold, there is little else for traders to turn bullish.
4)	Weekly hog weights declined by 0.2 pounds to an average of 291.1 pounds. Further decline is expected to move through the summer.	4)	Weekly hog weights are 3.1 pounds higher than a year ago. There are sufficient hogs and plenty of pork available for 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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