DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $236.25 -$1.83*

Hogs: Lower Futures: Higher Lean Equiv: $112.46 +$4.08**

* 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 were finally able to post strong gains after falling over the period of three weeks. It is possible a spike low might have been established based on the action Tuesday. However, the strength will need to continue to confirm that technical action. Without cash cattle trading Tuesday and continued weakness of boxed beef, the market may remain vulnerable to limited upside potential. There should be some cash activity developing Wednesday, but it is expected to be light. Boxed beef prices continue to decline with choice cuts down $3.04 and select cuts down $1.54.

Hogs tried to hold Tuesday and even move higher in sympathy with the higher cattle trade. However, futures succumbed to selling pressure as the day progressed. The charts are looking very similar to the decline experienced in cattle with lower lows and lower highs on a daily basis. The December contract closed at the lowest level since Feb. 22. Cash on the National Daily Direct Afternoon report declined $0.41. The large rebound of cutouts was not able to turn the tide of selling. Pork exports sales so far this year have totaled 1.445 million metric tons (MMT) compared to 1.550 MMT during the same time last year. China purchases have slowed compared to last year.

	BULL SIDE		BEAR SIDE
1)	Cattle futures bounced even through cash has not yet traded for the week and boxed beef prices continue to decline.	1)	Further gains will need to be seen in the cattle complex over the next few days or futures may fall back again.
2)	A spike low may have been established, which could increase trader interest in buying futures in anticipation of a strong price retracement.	2)	Continued weakness of boxed beef may leave cash trading this week steady at best.
3)	Hog futures are oversold and ripe for a rebound.	3)	Hog futures have been unable to find support with lower lows on a daily basis.
4)	Strong cutouts could provide support to the market turning traders more friendly and wiling to establish long positions.	4)	Hog supplies are plentiful with packers able to obtain the required animals without difficulty making it unnecessary to bid aggressively to find supply. .

**

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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