DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $198.14 +$1.50*

Hogs: Higher Futures: Higher Lean Equiv: $115.36 +$1.55**

*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:

Traders did not find anything positive coming out of the extended weekend. There was little indication of the need for packers to bid higher. Business is expected to be accomplished Wednesday with no better than steady prices with last week. Now the issue here is that boxed beef seems to be performing well with gains Tuesday of $2.12 for choice and $2.15 for select. This, along with lower weights last week, should provide some support. However, June futures moved to the lowest level since early October as technical support was broken.

Hog futures gapped lower on the open with traders reacting to the pressure on the livestock complex. Concern that demand during the holiday was not as good as expected seemed to circulate, causing traders to react rather than assess. Once the bearishness gripped the market any positive influence fell on deaf ears. The National Direct Afternoon hog report showed cash increased $1.90. Cutouts were higher on the midday report and closed $1.55 higher for the day. Packers may be more aggressive again Wednesday as they need to procure the desired number of hogs to keep plants running efficiently. This would seem indicate support should return to the market unless cutout strength will not follow through.

	BULL SIDE		BEAR SIDE
1)	Cattle weights have been declining, which would take more cattle to obtain the same amount of tonnage. This is contra-seasonal.	1)	Live cattle breaking below technical support Tuesday does not bode well for the market. Cash is expected to be lower this week.
2)	Boxed beef prices have been increasing after a period of weakness. Consumers seem to have adjusted to higher food prices and continue to purchase higher end cuts of meat.	2)	The cattle complex could not find support from the significant drop of corn Tuesday. Its own fundamentals are too bearish at present.
3)	Hog futures gapped lower on the open Tuesday with that gap now a target for technical traders to fill.	3)	Packers seem to have little difficulty finding hogs to process. They remain aggressive only part of the week, which allows them to purchase what they need.
4)	Higher cutouts should provide support as it indicates demand remains strong. An increase in retail orders would indicate good movement over the holiday.	4)	Traders will be cautious to buy back into the market and may remain sidelined for a few days.

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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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