DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $157.51 +0.25*

Hogs: Steady Futures: Lower Lean Equiv: $ 97.63 +0.71**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

General Comments:

Live cattle did close in positive territory Friday, but futures are still suspect, and weakness could unfold Monday. Strength might have been attributed to positioning before the Cattle on Feed report. There was some disappointment over the inability of cash to trade higher, which could pressure April futures due to the large premium it has to cash. Technically, April and later futures did hold support at the 20-day moving average Friday, triggering some buying interest. There seems to be a consensus that packers will need cattle this week in order to fill processing schedules, which may have them bid early and more aggressive, which should push cash prices higher. The Cattle on Feed report was neutral for on feed numbers as well as marketings. There is some bearish implication due to placements being 3% above a year ago. However, that should not have any impact on the market Monday or in the near term.

Hogs just could not rebound to close higher with the exception of October and later contracts. Even though futures dipped a bit last week, they are still technically overbought, but further price corrections may be put on hold due to the potential for packers to come to the market aggressively looking for hogs to maximize chain speed. Demand remains strong and there will be a surge of consumer buying in the aftermath of the sever winter storms that many had to deal with. Cash price is expected to be no worse than steady and may even be higher depending what needs to be purchased.

	BULL SIDE		BEAR SIDE
1)	Cattle futures held support again Friday possibly indicating downside risk is limited, giving traders the confidence to buy into futures.	1)	The placement number on the Cattle of Feed report was bearish and could have an influence on the market even though it may not be an issue until later. It could be enough to turn the trend.
2)	The Cattle on Feed report was mostly neutral. With those numbers now known, the trade can focus on the market itself and the strong demand for beef.	2)	Packers may not bid higher this week due to the ability to purchase cattle at steady prices last week. Feedlots will need to make the decision to sell or try to increase weights at high feed prices.
3)	The trend for hogs is still up due to solid support from cash and the need for packers to make up for some lost tonnage over the past week.	3)	The premium in hog futures may be just too much after the meteoric rise higher. Futures remain overbought and may be ripe for a greater price correction.
4)	Demand is strong and packers need to fill that demand or lose some market share. This should support steady to higher cash.	4)	Pork export sales were lower than the previous week and below the four-week average. This could be an indication of reduced international demand for the time being. Traders my turn more cautious and lighten up on long positions.

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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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