DTN Early Word Livestock Comments 08/10 06:17
Traders to Focus on Cash
Feeder cattle led the cattle complex lower Tuesday. Again, it reacted to
stronger corn prices as usual and not what the actual internal fundamentals
suggest. Traders remain cautious over whether cash cattle will trade higher
this week. Hogs held well, rejecting the early lows allowing futures to close
mixed. Strong cash will dictate strength Wednesday.
DTN Contributing Analyst
Cattle: Steady Futures: Mixed Live Equiv: $194.86 -0.99*
Hogs: Higher Futures: Higher Lean Equiv: $131.93 -$0.21**
*Based on formula estimating live cattle equivalent of gross packer revenue.
(The Live Cattle Equiv. 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.
True to form, boxed beef prices saw their day of strength Monday and then
declined Tuesday with choice down $1.51 and select down $1.16. This may be it
for much of the rest of the week if it follows a similar recent pattern. Higher
corn prices and weaker boxed beef may be used by packers to limit what they
will pay for cattle this week. Even if they do pay higher cash, it may be
limited. The strategy may be to pay $1.00 to $2.00 more, as they did last week,
in order to continue to purchase cattle ahead and limit having to pay up
substantially in any given week. However, that strategy may only buy some time
and eventually tighter supply will need to be reckoned with. Hot weather has
subsided in many areas which will improve cattle performance.
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