DTN Early Word Livestock Comments

Cattle: Lower Futures: Higher Live Equiv: $208.32 +1.29*

Hogs: Steady Futures: Higher Lean Equiv: $121.21 +1.06**

* 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:

Feedlots were looking at the market Thursday with only one eye open, and they were squinting with the open eye as well. It was painful to watch as cattle futures posted triple-digit losses in numerous contracts while corn prices rocketed higher. Cash traded lower and packers were able to extend their purchases further into the future. This does not bode well for the near term. Boxed beef closed nicely higher Thursday, but although friendly, the focus was on grain prices. The weekly Export Sales report was not even enough to stem the swelling tide of weakness even though sales were 57% higher than last week and 38% higher than the previous week. Cash trading is mostly done for the week, setting a bearish tone for next week. There may be bright spot Friday. Some short-covering may take place and overnight corn futures are nearly eliminating half of Thursday's limit gains.

Hogs suffered losses Thursday, but not quite to the extent of cattle. However, it solidifies the idea that the top is in. Now that does not mean that futures will continue to weaken, but that futures will not return to new highs anytime soon. It seems like the order of business technically will be to close the price gap in the May contract at $105.95. Export sales were not good again even with the adjustment that was made due to an error in reporting last year. China did show up as the top buyer, but at a low amount. Higher cash Thursday, along with higher cutouts and reduced cold storage levels compared to a year ago should provide some support. Estimated hog slaughter for Saturday is 63,000 head.

	BULL SIDE		BEAR SIDE
1)	Grain prices may be lower Friday, which would relieve some selling pressure on futures.	1)	Cattle are under pressure from numerous angles overriding the elements that are friendly. This will be difficult to turn.
2)	Cattle future are deeply oversold, possibly triggering some short-covering into the weekend.	2)	Substantially lower cash this week sets the stage for packers to bid lower next. They will now play the waiting game.
3)	Continued higher cash and higher cutouts should provide support even though grain prices are increasing.	3)	The top is in and futures may trade sideways for a bit as traders assess supply and demand.
4)	China was the top buyer on the weekly Export Sales report again. They will continue to need pork and are willing to pay up for it.	4)	Export sales showed another rather dismal number. This needs to pick up or cash may falter.

**

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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