DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $191.70 -$2.65*

Hogs: Steady Futures: Mixed Lean Equiv: $113.70 +$2.44**

*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:

Live cattle just could not uncover buying support with futures trending lower much of Thursday. There was no change in the cash market with prices remaining steady with last week on light activity. Packers have regained control of the market and have no need to bid higher to procure sufficient supply this week. June holds a discount to cash but there is a lot of time before the contract will settle, leaving that as a non-issue for the time being. Feeder cattle may find some buying interest today due to corn futures being substantially lower overnight. Weekly export sales were 28% above the previous week at 14,600 metric tons (mt). Boxed beef took a hit Thursday with choice down $4.56 and select down $1.87. The high price of beef might be having an impact on consumer preferences. The huge decline of the stock market may have a near-term influence on the market.

Hogs showed another strong day, but can we see three days of gains in a row? Considering the massive price decline over the past few weeks, one would think there is much more upside remaining for prices. Cutouts gained $2.44, providing some hope that consumer demand is improving. However, cutout gains need to be consistent for a period of time before traders will get too excited. Packers were not aggressive Thursday with cash down $4.90 on the National Direct Afternoon Hog report. The aggressive purchasing Wednesday seems to have allowed packers to obtain the majority of hogs needed for the week. Weekly export sales totaled 23,800 mt and were 24% below last week. Mexico continues to be the top buyer. Saturday slaughter is projected at 47,000 head.

	BULL SIDE		BEAR SIDE
1)	Overnight pressure on corn prices could provide a boost to cattle futures.	1)	Lower boxed beef prices may indicate more consumers are moving away from higher end cuts of beef. This could put further pressure on the market.
2)	Steady cash price should provide support to the market due to the discount June carries to cash.	2)	It may be difficult for cash cattle to trade higher over the next few weeks as some are already contracted ahead and more market-ready cattle may be available.
3)	Traders have regained confidence to buy into the hog market due to continued tight supplies and the potential for cutouts to find support.	3)	Pork cutouts need to consistently see support, or the market could fall back again as lower prices would be needed to stimulate demand.
4)	Hog futures need to move higher to correct the oversold status of the market. Further short-covering may unfold.	4)	Packers may not be very aggressive Friday as they have already purchased a large volume of hogs this week.

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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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