DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $289.49 +$2.32*

Hogs: Higher Futures: Higher Lean Equiv: $103.71 -$0.27**

*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 rebounded as traders do not believe the New World screwworm and the small plant closings will have any negative impact on the market. Beef demand remains strong, and there is little indication of a surge in available cattle or herd rebuilding. The U.S. and Iran have a preliminary peace agreement to end the war and lift the blockade of the Strait of Hormuz. Crude oil prices have fallen significantly over the past three days, which will lower fuel prices. Consumers will have more disposable income, which may keep beef demand strong. Boxed beef prices were higher on Monday, with choice up $3.12 and select up $3.69. The market is holding support, which may provide traders with the confidence to buy into the market. Feeder cattle surged higher as demand at auctions remain strong, with a premium being paid for cattle.

Hog futures reversed Monday, with October through February contracts moving to new lows. Support continues to remain elusive, with fund traders net short in the market. Packers were aggressive on Monday with the National Daily Direct Afternoon Hog report up $1.98. Pork cutouts declined $0.27. Pork demand is good, but it is masked by the availability of the product. The strong slaughter pace increases the availability of pork, which keeps supply readily available for demand. Pork prices are not improving due to the plentiful supply. There has been anticipation that hog runs would diminish, but that has not been the case.

	BULL SIDE		BEAR SIDE
1)	The strength in cattle futures on Monday indicates the recent news has not been bearish for the market.	1)	Packers continue to reduce slaughter, attempting to improve their margins. Feedlots cannot hold heavier cattle indefinitely.
2)	Packers may need to be more aggressive this week, as they were light buyers last week.	2)	Live cattle are at the top of the recent trading range, which may limit further upside potential.
3)	Hog slaughter remains strong and should keep supplies current. This may eventually tighten supplies.	3)	New lows on some hog contracts do not bode well for the market. Traders see no need to cover their short positions even though the market is oversold.
4)	Hog futures remain oversold, and a price retracement could take place at any time.	4)	Pork cutouts lack consistent support. The supply of pork is plentiful.

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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