DTN Early Word Livestock Comments      07/03 06:15

   Lower Cash Cattle Trade Expected

   Cattle futures turned on their heels Wednesday and regained much of what was 
lost on Tuesday. Traders looked past the news of cattle imports resuming from 
Mexico and returned to market fundamentals. Hog futures exhibited bull 
spreading again with nearby contracts closing higher.  

Robin Schmahl
DTN Contributing Analyst

   Cattle: Lower          Futures: Mixed         Live Equiv: $287.15 -$0.32*

   Hogs: Lower           Futures: Mixed         Lean Equiv: $116.68 -$1.55**

   *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 found footing Wednesday as traders digested the news of the 
renewal of cattle imports from Mexico and bought the break. This resulted in 
futures nearly recovering what had been lost Tuesday. However, further strength 
may be limited due to Northern dressed cattle trading steady to $2.00 lower. 
Cash trading today should follow suit, with most sales lower. Packers seem to 
have surrounded themselves with sufficient supplies for the time being. Boxed 
beef prices were mixed with choice down $0.74 and select up $0.25. Mixed boxed 
beef prices have been the pattern lately and could indicate demand might be 
slowing. The markets will be closed on Friday in observance of Independence Day.

   Hog futures exhibited bull spreading again Wednesday with nearby contracts 
closing higher. However, traders lacked conviction as there is concern over 
demand. The recent decline in cutouts may simply be due to the time of year and 
the holiday weekend. Retailers had purchased pork earlier and are now waiting 
to see the movement of pork over the holiday before restocking. Packers were 
aggressive on Wednesday as they purchased hogs to fulfill their needs for the 
week. The National Daily Direct Afternoon Hog report showed cash up $0.51. Pork 
cutouts continued their slide with cutout values down $1.55.

   BULL SIDE                               BEAR SIDE
   Traders bought the break in the
   cattle market as they decided the       The recent slide in cash cattle may
1) resumption of imports from Mexico    1) continue as demand slows through the
   would not have much impact on           summer.
   supplies.

   Cattle weights remain above a year      Boxed beef prices have been variable
   ago but have been decreasing. Steer     over the past two weeks, indicating
2) weights averaged 931 pounds in the   2) demand is slowing seasonally and
   latest report, 2 pounds lighter than    consumers are reducing purchases due
   the previous week.                      to high prices.

   The weakness of pork cutouts may be     Pork cutout prices have been under
   temporary and demand will resume at     pressure. That is not expected to
3) a higher pace during July.           3) change Thursday. Traders are
                                           concerned demand may be slowing.

   The October and December hog            Traders may remain cautious ahead of
4) contracts have chart gaps above the     the 3-day weekend as they are
   market that may be filled at some    4) uncertain about demand. This may
   point.                                  keep pressure on hog futures.


   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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