DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $177.21 +0.27*

Hogs: Lower Futures: Lower Lean Equiv: $100.02 -1.25**

* 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:

Traders decided to take profits before the end of the week and to close out the month. Future posted triple-digit losses across the entire livestock complex. This does not make one feel warm and fuzzy to begin the week. There may likely be some follow-through selling in live cattle futures as April is now front-month and carrying a significant premium to cash. Cash did not increase last week as anticipated yet there were plenty of cattle for processing. Feedlots may become a bit more nervous now that another week has passed without packers bidding higher. Decisions will be made whether to feed some cattle a bit longer or move those that are backed up rather than spend more money on high-priced feed. April and August futures broke below support at the 40-day moving average, increasing the bearish tone. April futures have fallen $5.80 in less than two weeks as the stiff premium to cash is being removed. Boxed beef closed higher Friday, but that will not be a focus for the trade Monday. The focus will be more technical.

Hogs turned tail Friday as sellers became aggressive. The few bearish items of last week consisting of choppy cutout prices and a significant decline of exports on the weekly export sales report might have been just too much for a lofty, overbought market. However, even with the triple-digit declines of futures, the uptrend remains intact. Traders will determine whether the decline of exports might be due to less buying interest for a short period or if it was a result of high prices. China's internal pork prices have been decreasing the past few weeks, which could signal a slowing of demand for a period of time. Packers are expected to start out less aggressive this week, waiting to see how cutouts will perform and whether current price is high enough to keep hogs coming to the market.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded steady with the previous week and feedlots may continue their resolve to hold for nothing less and hopefully more this week.	1)	Cattle futures broke chart support on multiple levels, which may keep sellers aggressive. More premium may be eliminated from April as a spring price rally might not look quite as rosy.
2)	Cumulative beef export sales have reached 334,189 metric tons. This is 62,436 metric tons more than a year ago and the highest on record for this time of year.	2)	Cash may have run its course. Packers may show no interest in bidding higher especially in light of weaker futures.
3)	The large decline of hog futures has not broken the uptrend that has been in place the past one and a half months. Cash remains strong and hog supplies might tighten.	3)	The April hog contract carries a stiff premium over cash, which may need to be reduced. The decline Friday may trigger further price erosion.
4)	A lower opening may be looked at as a buying opportunity. It would be a nice correction of an overbought market.	4)	Packers have been aggressive in raising prices and purchasing hogs. That may come to an end for a period of time as cutouts are potentially showing price resistance. Last week's cutout prices have been variable.

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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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