DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $210.26 +0.15*

Hogs: Steady Futures: Mixed Lean Equiv: $103.88 -2.40**

*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 closed higher leaving the market maintaining a sideways trading pattern. As long as cash holds steady, futures may remain sideways. Volatility was confined to about $1.00 swing in the market. Traders are trying to weigh the amount of cattle available to the market with the pace of current demand. Packers have been willing to pay steady money for cattle and are finding willing sellers. Boxed beef was mixed Wednesday with choice down $0.85 and select up $1.27. Demand may hold or increase at these prices, leaving beef prices mixed for the time being. Traders are cautious over the upcoming Cattle on Feed report to be released Friday. Weekly export sales will be released Thursday morning and may have an impact on price direction.

Hogs came under substantial pressure as the weakness of cash and cutouts fails to provide much needed support. The chart gaps for December, February and April were closed, but that did not uncover aggressive buying interest. Cash was slightly lower on the National Direct Afternoon report with a loss of $0.04. Cutouts took it on the chin with a decline of $2.40. The recent increase of futures without cash and product support leaves the market vulnerable to further pressure. Weekly export sales need to be good in order to provide some positive fundamental news. Saturday slaughter is projected at 225,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures bounced from the lows, leaving live cattle in a sideways trading range.	1)	Live cattle futures are maintaining the gains but are not able to continue to trend higher.
2)	Steady cash trade provides greater optimism that both supply and demand may be balanced with the potential that price may increase.	2)	The Cattle on Feed report could show a significant amount of cattle in feedlots keeping near-term supply heavy.
3)	Now that some contracts closed the lower chart gaps, December and February have charts gaps over $5.00 higher that may be filled.	3)	Underlying fundamentals in the hog market are bearish. Cash and cutouts have not supported the recent rally with further weakness possible.
4)	Weekly export sales are expected to be good with China listed again as a buyer.	4)	The amount of pork expected to be available to the market in the weeks ahead may be difficult to absorb unless both domestic and international demand improves.

**

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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