DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $195.85 +$0.92*

Hogs: Steady Futures: Higher Lean Equiv: $114.01 +$2.00**

*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 pressure from last week was relieved Monday thanks to pressure on grain prices. Corn futures are higher overnight, which could temper some of the strength. Feeder cattle showed the most reaction as short-covering propelled the market higher, eliminating the losses of last week. Live cattle were less exuberant but did close higher. Traders are showing caution over cash trade potential this week. Cash trade is not expected to take place early with packers potentially waiting it out as they already have some cattle contracted for the week. Boxed beef provided some support with choice up $1.77 and select up $0.26. However, the erratic nature of boxed beef may leave this less as a market indicator. The Commitment of Traders report showed funds as net buyers of 8,477 contracts increasing their net-long positions to 55,284 contracts for the week ended April 26.

Hogs were on a roller coaster with futures plummeting on the open Monday then rebounding before settling back into the close. The May contract has eliminated all premium it contained to cash over the past two weeks. June fell near the 200-day moving average and nearly closed the chart gap that remains from June 19 at $101.95. The National Direct Afternoon Hog report showed cash down $2.58. However, the bright spot and more important was that cutouts closed $2.00 higher. I know one day of higher cutouts is nothing to hang your hat on, but it may indicate prices are low enough to stimulate greater consumer interest. Packers might be more aggressive in the cash market today. The Commitment of Traders report showed funds as net sellers of 14,581 contracts, bringing their net-long positions to 41,609 contracts.

	BULL SIDE		BEAR SIDE
1)	June live cattle futures may move closer to cash, eliminating some of the discount.	1)	The price rally in the cattle may have been mostly due to lower grain prices. A rebound of grain prices may keep pressure on the market.
2)	Feeder cattle showed strong gains, which may continue Tuesday with technical traders potentially targeting the close of the chart gaps.	2)	A fair amount of cattle already purchased ahead for this week may leave packers less aggressive. Lighter showlists may leave them unconcerned over supply.
3)	Higher pork cutouts may indicate consumers are seeing the value of pork and are including more of it in their meat purchases.	3)	June hogs bounced from their lows Monday but did not close the chart gap that remains below the market at $101.95 which is right near the 200-day moving average. This level could be tested.
4)	Hog futures are oversold and ripe for a bounce after two weeks of falling prices.	4)	Cutouts need to show more than one day of strength before traders might step back in more aggressively to establish long positions.

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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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