DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $202.72 +$0.26*

Hogs: Higher Futures: Higher Lean Equiv: $117.63 +$1.22**

*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 finished a strong week in both cash and futures. This was positive in light of corn futures continuing to make new contract highs. Feedlots hope there is more to come as increased cash prices are needed to keep up with rising feed prices. Last week, dressed cattle in the North traded $2.00 to $3.00 higher outperforming live cattle trade in the South which was $1.00 higher. Packers may be a little more aggressive this week if showlists again do not show ample market-ready cattle. However, seeing higher corn futures beginning the week due to further planting delays may put some pressure on feedlots to move cattle with limited desire to hold out. Boxed beef prices Friday were mixed with choice up $0.76 and select down $0.81. For the week, April live cattle gained $2.85 with June up $2.60. April feeder cattle futures gained $1.65 with May up $2.40.

May hogs are the lead month and carry a large premium to cash. Traders were not shy about adding further premium on Friday with futures gaining $1.22. The May contract has always been an odd contract as it is not as widely traded as other contracts. It contains much less open interest than the others with lighter trading activity during the day. It is more of a follower than a leader during the trading day. It will be interesting to see whether the current premium can be maintained. It will need to be supported by a large rally in the cash market over the next month. The National Direct Afternoon Hog price increased $1.83 on Friday. Pork cutouts on Friday gained $1.31 providing support for higher prices. China was listed as a buyer on the weekly export sales report, but that news was offset by significantly lower sales in comparison to the previous week. June futures gained $3.90 for the week while July gained $3.52.

	BULL SIDE		BEAR SIDE
1)	Cattle futures were able to increase despite the continued rise of corn prices. This may give feedlots confidence to hold for more this week.	1)	Continued higher grain prices again overnight might put pressure on livestock futures.
2)	Steer weights have been declining, indicating any backup may be cleaned up. Weights have declined 9.2 pounds over the past three weeks.	2)	Cattle traders may take a wait-and-see attitude Monday. There will likely be no cash trade as they wait for showlists and watch the movement of grain futures.
3)	Hogs saw higher cash and higher cutouts Friday with the potential for packers to be more aggressive once slaughter moves back to normal after the holiday.	3)	May hogs are the lead month and carry a lot of premium to cash. This may leave traders less aggressive to add to long positions until future direction is established.
4)	June and July hog contracts have a chart gap to fill above the current level.	4)	Packers continue to have a sufficient supply of hogs to choose from, leaving them less aggressive.

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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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