DTN Early Word Livestock Comments

Cattle: Steady Futures: Lower Live Equiv: $191.00 -$1.67*

Hogs: Steady Futures: Mixed Lean Equiv: $107.64 -$4.20**

*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 opened higher Tuesday but spent limited time in positive territory. Market forces were at work tugging on its short tails. Some cash trade surfaced Tuesday that did not point to solid gains for futures. Cattle in the South traded steady with last week whole Northern cattle traded 50 cents lower. Early trading with the inability of cash to move higher does not bode well for the week. Packers are in control with some of the cattle being added to already booked supplies for later this month. The earlier concern over the potential for increased supply and lower prices in May is coming to fruition. Of course, the state of the economy does not help matters impacting demand. Boxed beef prices were mixed again with choice up $3.85 and select down $1.93. Higher corn futures overnight may continue to keep pressure on feeder cattle.

Hog futures were not sure which way to go as futures swung up and down throughout the day. Traders were torn between another day of strong cash with the National Direct Afternoon report showing a gain of $2.27 while cutouts pointed lower with the afternoon cutout report showing a large loss of $4.20. May and June were able to close higher but the rest of the complex showed losses. Friday is the last trading day for the May contract with June taking over with prices very near each other at present. The supply of market-ready hogs is not abundant, but it is not making any difference if demand remains slower.

	BULL SIDE		BEAR SIDE
1)	Steady cash with last week should be viewed as a victory even though there were hopes for higher prices.	1)	Corn futures were higher overnight, which may put further pressure on feeder cattle.
2)	Cattle futures have a chart gap that needs to be filled on the upside at some point.	2)	Packers are contracting cattle already for the end of the month, which does not bode well for cash the rest of month.
3)	Packers were aggressive in purchasing hogs, even though cutouts continue to flounder. Makes one wonder if demand is improving but not yet reflected in cutouts.	3)	Hog futures made new lows again Tuesday with July and later contracts closing near those lows. Traders remain unwilling to buy into the market aggressively.
4)	Chart gaps remain above the market in the June, July and August contracts that may be filled in the near term.	4)	The sharp decline in cutouts Tuesday does not provide support to the market. Overall demand continues to flounder.

**

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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