DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $196.30 -$0.11*

Hogs: Steady Futures: Mixed Lean Equiv: $111.91 -$1.02**

*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:

The bearishness of the Cattle on Feed report last week continues to hang over the market despite the disbelief by many of the placement number. Cash traded at steady to higher this week, which should have provided some support, but futures are more than $4.00 lower than a week ago. Friday is the last day of trading for April live cattle with June taking over as front month and carrying a discount to cash. Traders are cautious over the amount of cattle that may be coming to the market over the next two months. Cutouts were mixed Thursday with choice up $0.69 and select down $1.26. Weekly export sales were nothing the write home about as they were 24% lower than the previous week. Corn futures are higher again overnight, which may limit the upside potential for feeder cattle after the turnaround Thursday.

Hog futures rebounded after three days of liquidation and an oversold market. The turnaround was not supported by either cash or cutouts, which may limit price strength unless cutouts begin to trend higher. Cutouts declined $1.02 Thursday while the National Direct Afternoon Hog report showed a cash decline of $2.16. Weekly export sales were good at 31,500 metric tons (mt) which was 18,600 mt higher than the previous week and may have had some influence on the short-covering Thursday. Price support was broken Thursday, but futures were able to close back above it again. Saturday hog slaughter is estimated at 40,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle were steady to higher again this week, indicating packers need cattle and are aggressive at getting them. Cash trade continues to take place earlier in the week.	1)	Selling pressure on June live cattle does not provide optimism over the outlook of cash. Higher numbers are expected to be available to the market over the next two months.
2)	Chart gaps remain above the market in both live and feeder cattle futures that need to be filled.	2)	The bounce in feeder cattle Thursday may be short lived as new lows were initially established before the turn. Corn prices continue to increase, possibly limiting upside potential.
3)	Hog futures have had their three days of fund liquidation with traders possibly willing to buy back into the market as futures closed above support.	3)	Pork cutouts have not been able to find solid support, which is what traders are looking for. Demand is good but not as strong as hoped, leaving packers less aggressive.
4)	Good export sales indicate international demand remains strong, keeping domestic supply from backing up.	4)	Without support from cash and cutouts yesterday, hog futures may have limited upside potential.

**

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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