DTN Early Word Livestock Comments
Cattle Futures Expected to Trade Higher
Cattle: Steady Futures: Mixed Live Equiv: $288.19 -$0.34*
Hogs: Higher Futures: Higher Lean Equiv: $103.36 +$3.06**
*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.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
Cattle traders thought it was best to take some profit off the table ahead of the Cattle on Feed report and the extended weekend. There was really little to be concerned over with the Cattle on Feed report, as most of the reports may show a knee-jerk reaction if the report is negative, only to regain support in time. Without the herd rebuilding, it is unlikely there is much downside to the market. But anything can happen over a three-day weekend, and taking a profit to reduce exposure was prudent. The news concerning the New World screwworm has been taken in stride and has not impacted the market as had been feared. The Cattle on Feed report was released and is neutral to slightly bullish. On feed on June 1 was 102% and slightly below the average estimate of 102.3%. Placements in May were at 90% and below the trade estimate of 92.8%. This would be considered bullish. However, marketings totaled 88% and was below the average estimate of 89.0%. This is considered slightly bearish and balanced the report. Boxed beef was mixed on Friday, with choice up $0.45 and select down $2.67. Live cattle sales on Friday ranged from $258 to $260.
Hog traders found little direction on Thursday, resulting in a mixed market at the close. The National Daily Direct Afternoon Hog report on Friday showed cash down $3.28 as packers pulled back to finish purchases for the week. Pork cutouts provided some offset to cash weakness, posting a gain of $3.06. Pork butts jumped $13.64, with bellies gaining $6.81. Futures are struggling to maintain support, but traders are having a difficult time finding it, much less enough to turn the trend higher.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle placements in May were below the trade estimates and may provide support to the market. | 1) | Cattle marketings in May were below the trade estimates. Packers have been reducing slaughter, resulting in heavier-weight cattle. |
| 2) | The cash cattle trade was supportive to the market, indicating that demand is not slowing and packers remain aggressive. | 2) | Cattle futures may find resistance at the highs. This may be a level at which selling interest will be strong. |
| 3) | Hog futures seem to be building technical support. Futures have been trading sideways for the past week as traders do not want to press the market lower. | 3) | Traders seem to be supporting hog futures at the low, but have little reason to buy aggressively into the market. |
| 4) | Pork demand remains strong as increased slaughter has been readily absorbed. | 4) | Even with higher slaughter rates, packers continue to have sufficient hog supplies. This leaves them less aggressive in the cash 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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