DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $229.09 +2.16*

Hogs: Higher Futures: Mixed Lean Equiv: $119.79 +0.04**

* 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:

Live cattle put in a strong day Tuesday, fueled mostly by continuing higher boxed beef prices. Some cattle being traded in the North at slightly higher prices for deferred delivery helped as well. This sets the potential for possible higher cash this week. It is Wednesday and bids and offers should surface, testing the resolve of both packers and feedlots. Packers do not want to bid higher and are hoping the increase of grain prices again Tuesday and overnight might push feedlots to sell cattle. Feedlots will decide if it is worthwhile holding out for higher prices only to pay higher prices for the feed they need to feed them for a few more weeks. Live cattle futures have made more than a 50% price retracement and have accomplished that with a vengeance. That level of support from futures could translate over into stronger cash.

Hogs took a beating again with the dip of futures deeper than many expected. Technically, the price gaps may be the magnet with June nearly able to close its gap Tuesday. July and August have a greater distance before that will be accomplished. Generally, a fund liquidation phase lasts two to three days before it runs its course, and Tuesday was day three. The National Direct Afternoon hog price was supportive, posting a solid increase of $5.18. This could stem the selling tide from a fundamental standpoint. Cutouts were only slightly higher.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have increased substantially even in the face of rising grain prices again Tuesday. There may be more to come.	1)	Cattle futures have accomplished a 50% price retracement and more, which may make technical traders settle back to see if underlying cash is going to follow.
2)	There is a strong potential for cash to trade higher this week as there was some stronger trade in the North Tuesday. Strong demand needs to be met, possibly making packers more aggressive with purchases.	2)	Higher cash trade is still not assured for the week. Wednesday should see bids and offers surfacing. Higher grain prices remain, and the USDA is releasing the World Agricultural Supply and Demand report Wednesday, which is not expected to be bearish.
3)	The significantly higher National Direct Hog price could change the minds of traders, turning them into buyers of this break.	3)	Hog futures having been moving to fill the chart gaps but have not yet accomplished that task. Those may be filled before contracts turn higher.
4)	Three days of liquidation generally results in a market that runs out of aggressive selling. Fundamentals again take over and those fundamentals have not changed. Demand is strong and hog supplies are tight.	4)	Hog supplies have remained high enough to keep chain speeds aggressive. Buyers continue to find market-ready hogs.

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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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