DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $178.05 +2.06*

Hogs: Higher Futures: Higher Lean Equiv: $114.43 +0.31**

* 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:

June and August live cattle futures pushed to new highs Monday as traders believe higher cash is on the way for this week. It will be interesting to see how early cash cattle will trade due to it being a holiday-shortened week. It will also be interesting to see how traders will react as the first quarter ends on Wednesday. Many times, funds may lighten up on positions in order to make the books look better for the quarter. However, with higher cash and strong boxed beef prices looking to dominate the week, they may see no need to take profits and then have to buy back in again. It seems like the trend has turned higher now that new highs have been established. The Commitment of Traders for the week ended March 23 showed funds net sellers of 4,005 futures contracts. This did trim net-long positions held by funds to 79,555 contracts. This will likely turn higher again on next week's report due to what took place in the market last week.

Hog futures were bound to close the price gaps left on the charts on Friday. They did it in one massive swoop Monday with futures falling nearly $2.00 in some contracts before the selling pressure subsided and futures were able to recover quite a bit of their losses. Cash was a little higher and cutouts gained further ground. That does not paint a bearish picture for the week. However, it is the end of the quarter and could follow a pattern of funds lightening up on long positions to make the books look better. The Commitment of Traders report did not show any fear of a sustained price decline as funds added 262 net-long positions, bringing their total net-long positions to 76,095.

	BULL SIDE		BEAR SIDE
1)	June and August live cattle futures established new contracts highs without difficulty. Other contracts may follow the lead as fundamentals are supportive.	1)	It is the end of the first quarter with funds potentially taking some profits for the end of the quarter and prior to the three-day weekend.
2)	The trend turning higher may give confidence to traders to step back into the market in anticipation of further gains.	2)	Cash may trade earlier in the week than desired due to the upcoming holiday weekend. This may limit the increase of cash gains.
3)	Hog futures came back quite a bit from their lows, possibly indicating selling pressure has run its course, with traders taking advantage of the dip to buy into the market.	3)	Hog futures declining in the face of strong fundamentals might indicate the market is too high and has a lot of the bullishness already factored in.
4)	Strong fundamentals remain in the market, providing solid support.	4)	Weakness of futures Monday might result in traders holding back, waiting to get a better idea of direction this week.

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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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