DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $289.82 +$1.63*

Hogs: Higher Futures: Mixed Lean Equiv: $102.67 -$0.69**

*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:

The higher cash cattle trade last week was not enough to move cattle futures to new highs. There was an expected reaction to the Cattle on Feed report, but futures could not hold the early highs of the day. The question now is whether futures can retest and break through contract highs. The current fundamentals would suggest that it will be the case. However, will demand continue to support the market? With fuel prices declining, there is good potential that demand will remain strong despite high beef prices. Boxed beef closed higher on Monday, with choice up $1.69 and select up $3.51. Feeder cattle continue to see strong demand at auctions, with premiums being paid in some cases. The Commitment of Traders report showed fund traders adding 13,733 long positions in live cattle, bringing their net long to 122,805 contracts. They added 1,964 long positions to feeder cattle, bringing their net long to 13,356.

Hog futures tried to maintain the gains from Thursday, but succumbed to selling pressure. Futures remained in the recent sideways pattern, but could not find sufficient buying interest to turn the market higher. The fundamentals do not paint a strong picture of support, much less a change in trend. Packers began the week aggressively, with the National Daily Direct Afternoon Hog report up $3.86. Cash is expected to be higher again today. However, pork cutout values declined by $0.69. Traders continue to have difficulty being bullish with variable demand. The Commitment of Traders report showed the fund traders as net sellers of 4,179 futures contracts, moving their net-short position to 28,640.

	BULL SIDE		BEAR SIDE
1)	Fund traders added to their long positions on the Commitment of Traders report. Liquidation is short lived.	1)	Cattle futures were not able to maintain strength on Monday, closing well off their highs. There seems to be price resistance at these levels.
2)	Packers need to maintain slaughter to meet demand. They cannot afford to hold for lower cash and risk being short bought.	2)	Consumers may have reached a threshold of how much they are willing to pay for beef. Further strength may be difficult to achieve.
3)	Hog futures have been able to maintain the recent sideways pattern and may be building support.	3)	Hogs have maintained recent support, but have not been able to retrace the losses seen in May. Fundamental support has been difficult to develop.
4)	Hog slaughter has been higher than a year ago, and now weights are decreasing. The market may begin pulling hogs forward.	4)	Hog futures are at risk of moving below support if consistent fundamental support does not develop.

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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