DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $168.59 -1.71*

Hogs: Steady Futures: Mixed Lean Equiv: $103.89 +0.83**

* 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:

April cattle futures could not hold onto gains of the previous three days as cash trading took place Wednesday at steady prices in the South and lower in the North. The anticipated spring price rally may be a bit later in coming, if at all. June futures are near the same price as April with August trading lower showing little optimism through the summer. Cattle need to be moved and packers may be able to obtain sufficient supply without having to bid up. Feedlots that had been holding out for higher cash have ended up losing money, feeding high-priced feed without any benefit. The second week of significant cash activity at midweek indicates there is a willingness and necessity to move cattle. Packers sense this and see no need to bid higher. Supply will need to tighten in the next weeks or the market may remain in the doldrums for the near term. The weakness of boxed beef does not help matters.

Hogs continue to reach higher with May through October contracts again making new highs Wednesday. Underlying cash continues to support with price increasing on the National Direct Hog Report. Futures are again reaching into overbought status, but that will be meaningless if packers continue to remain aggressive. Problems with African swine fever in China continue to circulate in the news. Their desire to rebuild their hog herd has been an uphill battle and will take longer to accomplish. This should keep them as buyers for the foreseeable future. Hog slaughter for Saturday is projected at 112,000 head.

	BULL SIDE		BEAR SIDE
1)	Packers may need to step up to the plate and increase bids in order to obtain the desired amount of cattle needed to keep plants full and customers satisfied.	1)	Cattle futures are struggling to rebound and may be unable to resume the uptrend due to the inability of cash to increase.
2)	Stimulus checks and improving restaurant demand should improve demand for beef.	2)	Cattle are being sold early and at steady to lower prices much to the dismay of feedlots that have been holding for higher prices. This leaves them in a quandary with more potentially throwing in the towel and selling.
3)	Traders remain friendly to the hog market, pushing futures to new highs again Wednesday. This has been nearly a daily occurrence, keeping the strong uptrend intact.	3)	Hog futures are again in overbought territory, which could trigger technical selling if something negative enters the market.
4)	Packers still have good margins even though those margins are tightening. This may keep them aggressively purchasing as long as money is to be made and demand is strong.	4)	Packers may be on the verge of slowing purchases for a bit as they have procured quite a bit of hogs. They may hold the line at steady cash soon and try to maintain profitable margins.

**

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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