DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $293.08 +$3.26*

Hogs: Lower Futures: Mixed Lean Equiv: $101.82 -$0.85**

*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:

It was a bit surprising that cattle could not extend their gains on Tuesday. The fundamentals support remains positive, but traders seemed more interested in taking some profit on long positions rather than guessing if the market will move to new highs. As I mentioned before, these higher levels may be an area of strong resistance. Higher cash trade last week may provide confidence for feedlots to hold for higher cash again this week, but so far, no bids or offers have been posted. Boxed beef prices were strong on Tuesday, with choice up $4.25 and select up $5.47. Choice has now moved back above $400.00 to $400.31 on Tuesday. It has been a while since choice boxed beef moved above that level.

Hog futures again tried to maintain positive trade, but only the August and October contracts closed higher. Futures continue to struggle at these lower levels, with bullish traders unable to find any solid fundamental reason to buy into the market aggressively. Cash was lower, with the National Daily Direct Afternoon report showing a decline of $0.51. Lower cash is again expected today. Pork cutout values could not find support, posting a decline of $0.85. The Quarterly Hogs and Pigs report will be released on Thursday. The estimates are for all hogs and pigs on June 1 at 101.0% of a year ago. Hogs kept for breeding at 99.3%. Hog kept for marketing at 101.1%.

	BULL SIDE		BEAR SIDE
1)	Strong boxed beef prices should support the market as demand remains strong.	1)	Cattle futures may have established a level of price resistance. Traders may be unwilling to push the market higher.
2)	New cases of the New World screwworm are being taken in stride and have not been a bearish influence on the market.	2)	At these loft price levels, business is being done with little reason to hold out for higher cash cattle prices. Feedlots may increase the sale of heavyweight cattle.
3)	Hog futures have been maintaining support and may eventually generate buying interest as traders may feel downside risk is limited.	3)	Hog futures have not been able to retrace after the large price decline in May and June. Traders are not bullish for the long term.
4)	Hog futures remain oversold. Fund traders could cover their net-short positions at any time.	4)	The upcoming Quarterly Hogs and Pigs report may keep futures rangebound today and Thursday.

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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