DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $269.85 +$1.85*

Hogs: Higher Futures: Mixed Lean Equiv: $106.52 -$1.08**

*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 uncovered buying interest after opening lower and trading lower early in the day. No cash cattle trade has taken place, but it is likely cash will be higher. Boxed beef prices were higher in both categories, possibly indicating the seasonal lull is behind, and stronger demand is returning. Of course, it will take more than one day of both choice and select boxed beef being higher. Choice boxed beef gained $2.92, with select up $2.05. Meatpackers who have been locked out of work for more than 70 days rejected the latest union-recommended contract offer from Cargill Meat Solutions in Fort Morgan, Colorado. Both sides will be back at the bargaining table. The cattle usually processed at this facility will continue to be diverted to other locations. Feeder cattle were strong in the nearby contracts but showed limited strength in later contracts. The May contract closed lower for the day.

Hogs were able to post further gains, but without much fanfare. Continued price strength remains elusive with the market potentially establishing a sideways pattern. The National Daily Direct Afternoon Hog report showed cash up $0.20. Pork cutout values declined $1.08, moving the average price down to $99.83. Packers should remain aggressive Wednesday as the slaughter pace remains strong and higher than a year ago. Packer margins continue to remain positive. There is a $13.00 discount from October to the soon-to-end August contract. This gap should narrow.

	BULL SIDE		BEAR SIDE
1)	Boxed beef prices are beginning to show some support, possibly indicating beef demand is improving.	1)	Traders have been hesitant to be aggressive in the market so far this week. Any indication of steady or weaker demand will limit upside potential.
2)	There has been some indication that packers may be short-bought and will need to step up aggressively to purchase cattle this week.	2)	Packers continue to attempt to improve margins by reducing slaughter. This could keep pressure on the market when market-ready supplies increase.
3)	Hog futures may be building a base of support after the meltdown last week.	3)	Hog futures have not found sufficient buying interest to move the market consistently higher. This may be a disappointment to bullish traders and cause further liquidation.
4)	Packers should be willing to purchase hogs aggressively Wednesday as they need to purchase quite a few more hogs to satisfy their needs for the week.	4)	Pork cutouts are struggling to find support, indicating demand is not holding as strong as hoped.

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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