DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $170.81 -$1.43*

Hogs: Steady Futures: Lower Lean Equiv: $101.36 +$1.66**

* 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:

At least it was a good close for the week for both cattle and hog futures. No definite trend was established for cattle last week; futures moved mostly in a sideways pattern, with the exception of April, with a lower high each day of the week. Generally steady cash prices were recorded for the South with prices lower in the North last week setting a negative tone for the market. Traders will ponder whether steady prices will again be achievable this week or if cash prices last week could be a foretaste of what may develop. Of course, there is hope packers may need to be aggressive and may need to bid higher to procure the necessary cattle to keep plants full and demand satisfied. The concern is the weakness of boxed beef and two weeks of lower-than-desired export sales.

It was no surprise hog futures were able to generally close higher on Friday due to a rebound of export sales from the previous week. The uptrend still remains intact even though there have been ups and downs with cutouts. However, the significant drop the National Direct price on Friday may be a warning shot over the bow. Packers may not be as aggressive this week and may be only willing to bid steady prices. Cumulative export sales for the year total 668,688 metric tons (mt). This was lower than last year, but the second highest on record. Demand for pork both domestically and internationally has been on fire with packers trying to keep plants running full to meet demand. Current demand and the prospect of tighter supplies as the year progresses may keep price supported.

	BULL SIDE		BEAR SIDE
1)	The higher close of cattle futures Friday may indicate support has been established and follow-through buying could dominate trading.	1)	Cattle futures seem to be carving out a sideways trading pattern. A bullish market needs to be fed and, without that, traders may decide to liquidate.
2)	Plants have processed a lot of cattle, which may require them to be more aggressive this week. Cash could remain no worse than steady and possibly higher.	2)	The disappointment of cash last week may make feedlots willing to sell at steady money rather than risking further price deterioration.
3)	Hog futures remain in an uptrend and it will take quite a bit of negative news to trigger heavy liquidation.	3)	Slaughter may slow this week as packers assess demand over the past few weeks against the blistering pace of slaughter.
4)	Demand is slowly improving from the food service industry as restaurants reopen.	4)	Packers may take a wait-and-see attitude and begin the week with steady cash bids. This could trigger some selling of futures contracts.

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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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