DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $182.90 +1.59*

Hogs: Higher Futures: Higher Lean Equiv: $115.56 +2.08**

* 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:

Cattle futures showed their strength Wednesday in light of the bullish Prospective Plantings report. Grain futures locked limit up after the report did not cause bullish traders to lose heart. Contracts closed higher across the board supported by strong boxed beef prices and the potential for significantly higher cash. No cash cattle were traded Wednesday with feedlots believing that they may be able to sell cattle for $3.00 to $4.00 higher. Higher grain prices as a result of lower planted acreage than expected were taken in stride as higher beef will offset the cost of feed. The demand outlook is positive with the seasonal price rally solidly under way. Cattle futures did not post new contract highs but came very close with a strong possibility of setting new highs Thursday.

Hog futures did not perform quite as well as cattle but held up well despite the strength of grains. May, June and July posted moderate losses while the rest of the complex closed higher. August was able to post a new contract high. Hogs did not feel the impact of higher feed prices as cash has been strong. Even though price closed a bit lower on the National Direct Hog report Wednesday, cutouts closed higher. This seems to indicate traders believe higher prices will continue to materialize with this bullish attitude and due to current fundamentals pointing higher. Weekly export sales will be released Thursday, which might have some impact on the market and is the last trading day before a holiday weekend. Projected Saturday slaughter was unable to be obtained Wednesday.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures held up well in the face of rising feed costs as planted acreage was less than expected.	1)	Only the December live cattle contact was able to make a new high. Other contracts could not accomplish the task. Futures could stall for a bit.
2)	Packers will need to bid up more than they expected as feedlots will hold on for higher cash prices.	2)	Substantially higher feed prices may cause feedlots to be more aggressive, moving cattle to keep current with marketing.
3)	Most hog contracts closed higher despite the potential for higher feed prices. Increasing cutouts indicates demand remains strong.	3)	Hog futures may consolidate at current levels and packers may limit their aggressiveness for short period.
4)	August hogs made new contract highs with other contracts not far behind. Traders feel confident market strength will continue.	4)	If weekly exports are disappointing, traders may sell more aggressively in case the export market is finding some price resistance.

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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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