DTN Early Word Livestock Comments 07/26 08:04

DTN Early Word Livestock Comments 07/26 08:04 Were the Cattle Reports Friendly Enough? Falling grain prices were able to provide underlying support to the livestock complex. It is questionable as to how long that support will be able to hold futures even though cash prices seem to be weakening. The Cattle on Feed report was friendly, but that in itself, will not be able to turn the trend up. Robin Schmahl DTN Contributing Analyst Cattle: Lower Futures: Mixed Live Equiv: $198.67 +0.28* Hogs: Steady Futures: Mixed Lean Equiv: $129.18 +0.11** * 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 GENERAL COMMENTS: Cattle received their support Friday in part from the Cold Storage report but mostly from substantially lower grain prices. Feeder cattle reacted directly from the lower grain prices. Surprisingly, traders have not shied away from the market due to lower cash sales for the week and they seemed confident that the Cattle on Feed report was not going to burn them if they held onto their long positions. Their assessment of the Cattle on Feed report was correct in that it was a friendly report. I would not say it was bullish as placements were down about 1% from a year ago while marketings were up about 1%. The caution here is that futures increased on Thursday and Friday despite lower cash. This could potentially result in futures not needing to move higher as the trade had already factored in a friendly report. Cattle futures are notorious for trading in the opposite direction the following day relative to what the report indicates. How much support will come from the bi-annual Cattle Inventory report is difficult to determine. It generally is not a market mover as it looks at cattle inventory from the previous year. Even though total inventory was down 2% from a year ago with calves down 2% as well, it may little impact.