DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $287.17 -$0.74*

Hogs: Higher Futures: Higher Lean Equiv: $103.98 +$2.90**

*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 futures spent little time in positive territory as cash trade was slow to develop, leaving traders questioning whether steady to higher cash trade would surface, with nothing done by the market's close. Instead of cash being steady to higher, the result was steady to $1.00 lower. Packers will not be very anxious to post bids this week, but will see how the news develops. JBS announced the closing of two small plants -- one in Pennsylvania and one in Tennessee. It is uncertain how much impact this will have on the market, other than psychological. The other is that more cases of the New World screwworm have been confirmed. The number of cases has increased to 12. These cases span over six Texas counties and one New Mexico county. It has been found in cattle, goats, sheep and a dog. Clearly, this is not going away anytime soon. Boxed beef prices were lower on Friday, with choice down $1.28 and select down $0.53. The Commitment of Traders report showed fund traders reducing their net-long live cattle futures position by 7,035 contracts to a net long of 109,072. They added 93 contracts to feeder cattle to bring their net-long positions to 11,392.

Hog futures fell to new lows on Friday before short-covering emerged, pushing prices into positive territory by the close. However, that is little consolation given the market's weakness over the past weeks. The cash and cutout prices have not fluctuated to any large degree over the past weeks, but the premium that had been prevalent in the market has eroded to move futures closer to cash. It was a nice bounce, but it may not be a change in trend. The National Daily Direct Afternoon Hog report showed cash down $1.99. Pork cutout values jumped $2.92. Packers may step up early to purchase hogs for the week. The Commitment of Traders report showed funds adding 4,612 short positions, increasing their net-short position to 24,461.

	BULL SIDE		BEAR SIDE
1)	Traders may see little downside price risk and will be willing to maintain support in the market.	1)	Packers are expected to reduce their bids this week in an attempt to take advantage of the news in the market.
2)	More cases of the New World screwworm will be taken in stride and may not impact the market.	2)	Fund traders are reducing their net-long position and may continue to do so in the coming weeks. This may limit upside price potential.
3)	Hog futures are substantially oversold and could correct soon. Generally, there is a 50% retracement in price after a decline of this magnitude.	3)	An increasing net-short position in hog futures does not bode well for the market. Fund traders are not optimistic.
4)	Packers may step up aggressively today to purchase hogs earlier rather than later in the week.	4)	Demand has not increased sufficiently to offset the increased slaughter, leaving sufficient pork available to the market.

NOTE:

The cattle complex has seen record-high prices in the last year. But it's also been saddled with record-high risk and volatility, among many other challenges. To better understand these cattle market challenges, join DTN Livestock Analyst ShayLe Stewart for the inaugural Beef Industry Exchange webinar hosted by Senior Livestock Editor Jennifer Carrico at 9 a.m. CDT on June 24.

In addition to ShayLe's cattle market update, DTN Ag Meteorologist John Baranick shares how variability and a building Super El Nino might save or doom U.S. pastures. Due to widespread drought conditions across the U.S., cow-calf producers may be considering a reduction of the herd. To prepare for this, University of Nebraska Lincoln Beef Systems Extension Educator Aaron Berger shares different strategies to set up cow herd rebuilding when it rains again. Register for the free webinar today: https://dtn.link/….

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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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