DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $216.27 +0.79*

Hogs: Steady Futures: Higher Lean Equiv: $114.13 -0.66**

* 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:

The cattle complex was able to hold well Thursday despite weakness of cash this week. Exports sales were not bad even though they were down 4% from last week. The four-week average was a good bit better, up 22%. Corn prices struggled throughout much of the day with the exception of the front-month May contract. Feedlots might breathe a sigh of relief that grain futures have backed off from the highs earlier in the week, but the crop year is just beginning, and a lot can happen. However, feed prices remain at lofty levels and will cut into profitability. Feedlots may be willing to sell cattle next week similar to this week at steady to lower cash. The April live cattle contract ceases trading Friday moving June to the front-month. June futures are carrying a discount to cash, anticipating further weakness. Futures contracts moved near the lows during the day but were able to bounce back further, indicating a sideways trading range may be developing.

Hogs just could not continue higher Thursday. Traders seemed to be very intent on closing the chart gaps in the June and July contracts. That was accomplished, possibly paving the way for futures to move back up and continue to trend higher. Cash was lower Thursday, but that was understandable due to the large increase earlier in the week. Packers were able to get their hands on sufficient supply to allow the market to drift lower the rest of the week. Export sales were somewhat neutral as pork sales were down from the previous week, but 59% higher than the four-week average. Hog supplies are tightening, which should make futures prices dips buying opportunities. Saturday slaughter is estimated at 51,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures moved near the lows of the price range that has developed over the past week, but support was able to hold.	1)	Cattle futures just cannot generate enough buying interest to turn the trend back up.
2)	Demand remains strong and boxed beef made a nice gain Thursday, indicating consumers still want beef.	2)	Weakening cash is a large hurdle that may not be able to be cleared as long as feed prices remain high. Feedlots will want to move market-ready cattle as quickly as possible.
3)	Hog futures remain above the 20-day moving average despite the decline Thursday, keeping the uptrend intact.	3)	Hog futures may have reached a formidable price ceiling, which may take a monumental effort to break above.
4)	Pork does not grow on trees and tightening supplies will be around for an extended period of time.	4)	Exports may need to increase in order to keep supply from backing up into the domestic market. China has not been purchasing as heavily as they had been.

**

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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