DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $281.95 -$2.71*

Hogs: Lower Futures: Lower Lean Equiv: $102.56 -$2.12**

*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 outlook for cash cattle trade does not look positive again this week. Early light cash trade took place at lower prices than last week, likely setting the stage for the rest of the week. Packers have the upper hand and are using it to their advantage. They already have some cattle purchased ahead for deferred delivery and will likely continue that trend to maintain an adequate supply, eliminating the need to be aggressive in the cash market. Boxed beef prices fell, with choice down $3.40 and select down $6.30. Thursday is the last trading day for the August feeder cattle contract, with September becoming the lead month. It will be interesting to see whether President Trump listens to the voice of cattle associations and Farm Bureau to reverse the decision to allow imports of 300,000 metric tons of beef for 90 days. Concerns have also been raised about the ability to inspect the large volume of beef in a short period.

Hog futures found minor strength likely tied to short-covering as traders remain uncertain over how much further prices will drop. The market is oversold technically, but that is meaningless if fundamentals are not supportive. The strong slaughter pace is meeting with reduced demand, resulting in lower cash and cutout prices. The National Daily Direct Afternoon Hog report showed cash down $2.07, moving the weighted average price to $90.75, where it has not been for quite some time. Pork cutouts fell $2.12 as bellies fell $6.94 and picnics declined $4.96.

	BULL SIDE		BEAR SIDE
1)	The cattle herd will not rebuild anytime soon as ranchers see negative market signals at a time when decisions to retain heifer calves or market them are made.	1)	Early cash trade indicates the potential for substantially lower cattle prices this week.
2)	Lower cash and the border reopening have already been factored into the market. The market may bounce as some short positions are covered.	2)	The large decline in boxed beef on Wednesday may set a negative tone in the market.
3)	Hog futures are significantly below cash, and any stability in the cash market may increase trader buying interest.	3)	Weekly hog weights averaged 284.1 pounds, up 1.5 pounds from the previous week and 3.1 pounds above a year ago.
4)	Technically, hog futures should retrace somewhat as traders may not press the market much lower.	4)	Hog futures are oversold, but the trend is down. The market will need to prove itself before traders turn bullish.

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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