DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $200.26 +$0.12*

Hogs: Lower Futures: Mixed Lean Equiv: $112.12 -$3.36**

*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 moderately higher with June, August and December leaving a minor gap. The market then took off as word trickled in that cash was trading higher. Southern cattle were seeing $1.00 higher trade while dressed cattle in the North were $3.00 to $4.00 higher. This caught the trade by surprise, resulting in aggressive buying of futures. The pace of slaughter has been brisk, and the number of cattle packers had purchased ahead in May dwindled rapidly. Feedlots were the winners with cash trade setting the stage for the rest of the week. However, there is growing concern over the continued rise of fuel prices and the impact that will have on beef demand. Boxed beef prices were mixed with choice up $0.32 and select down $0.15. Weekly export sales will be released Thursday morning.

Hogs could not find solid support. Futures traded higher briefly, but word began surfacing cutouts were not doing very well as the day progressed. Cutouts ended the day $3.36 lower. Cash was $0.43 higher on the National Direct afternoon report, but that had no real influence on the market. Hog futures tried to hold much of the day with the last minutes of trading showing substantial pressure developing as traders liquidated long positions. Futures closed lower, but thankfully rebounded from the lows near the closing bell. June hogs will stay near the index until they go off the board next Tuesday. The CME index Wednesday was $107.80. Saturday slaughter is estimated at 20,000 head.

	BULL SIDE		BEAR SIDE
1)	The jump of cash cattle prices sets the stage for the week as well as providing feedlots the confidence to demand higher prices next week.	1)	Live cattle futures left a chart gap on the open Wednesday that may be filled in the near term.
2)	Feeder cattle were in demand Wednesday with buyers aggressive at a livestock auction in Kansas. Tighter cattle supplies in the future are increasing buyer interest.	2)	Continued increasing fuel prices may have a significant impact on the purchase of higher end cuts of meat. Restaurant traffic may slow as more money is being spent on transportation.
3)	Hog futures rebounded significantly from the lows at the end of the day. This could indicate traders are interested in buying at lower prices.	3)	The large decline of pork cutouts Wednesday was a blow to the market, putting pressure on futures as traders liquidated.
4)	Weekly export sales might provide support if sales were good. This will keep pork moving by keeping supplies from backing up.	4)	Hog futures are struggling technically. Traders are not confident over a long-term uptrend after price movement of the past few days. Support will need to develop soon, or a further retracement is possible.

**

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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