DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $232.76 +2.24*

Hogs: Steady Futures: Higher Lean Equiv: $123.27 +0.87**

* 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 futures were in a wait and see mode Monday and likely the same will be seen Tuesday. Traders would like to see some cash business before taking a position on market direction. Boxed beef closed up very strong again with choice up $2.68 and select up $3.70, but that will have little influence on cash this week. There were a few head of cattle that traded Monday at steady money, but that provides no strong indication of what the average will be for the week. In fact, the anticipation is for no better than steady cash and possibly $1.00 lower. Packers have reduced slaughter and already have cattle on their books, leaving less urgency to bid aggressively. The Commitment of Traders report showed funds increasing their net-long positions by 6,080 to the current level of 54,945 contacts.

June and July hog contracts tried to shun lower prices, but just could not close in positive territory. Cash was lower, but cutouts were higher. The trading action Monday could indicate the market is trying to find support, but traders are cautious due to greater frequency of weaker cash. Concern has grown over the level of exports of pork to China. China's internal pork price has declined nearly 15% so far this month and is down 46.7% so far this year. Either their hog numbers are growing more than is thought or they are liquidating due to ongoing disease issues. It is difficult to say, but the consensus is that their hog numbers might be growing. The Commitment of Traders report showed funds as net sellers of 225 futures contract bringing their net-long positions to 76,547 contracts.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle closed nicely higher with live cattle futures closing mixed. Futures seems to be probing for support, which will need to be confirmed by steady cash.	1)	Slower chain speeds are slowing the amount of cattle needed to be purchased. This is leaving buyers less aggressive out in the country where there are a growing number of market-ready cattle.
2)	The discount to cash in the June contract should provide the incentive for traders to move it closer to cash. Strong boxed beef should allow for cash to remain steady this week.	2)	The technical action of live cattle futures did not give the impression the market has reached support.
3)	Hog futures rejected the lows Monday with the large break correcting an overbought market. There is now a chart gap remaining to the upside in the June and July contracts that need to be closed.	3)	Packers have not had to chase the market recently looking for hogs. There seems to be sufficient numbers to satisfy current demand.
4)	Demand continues to remain strong which should support prices as hogs will be needed by packers to fill the demand.	4)	Traders have not yet bought the break with any gusto. Lower highs and lower lows in futures Monday does not provide technical traders with any buy signals.

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For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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