DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $200.30 +$0.22*

Hogs: Lower Futures: Mixed Lean Equiv: $88.31 +$0.15**

*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:

Even though cash traded higher last week, April live cattle futures lost $0.17 for the week while June declined $0.52. Cattle trade in the South waited again until the eleventh hour, resulting in $1.00 to $2.00 higher trade. Cash in the North was $4.00 higher on average and a great victory for feedlots. Feedlots already have their sights set on higher cash this week and will wait it out again. Slaughter pace continues to remain strong as demand is holding. Boxed beef prices were higher Friday with choice up $0.37 and select up $0.28. There was a special announcement that the timely and accurate data to the CFTC of positions for the Commitment of Traders report is still unable to be submitted and reported correctly. The report will be delayed until this can be corrected.

The February hog contract has two days remaining to trade and then April will take over as lead month. April is holding nearly an $8.00 premium to February in anticipation of strong cash into the second quarter. Futures were mixed on Friday, posting limited gains and losses. The National Daily Direct Afternoon Hog report showed cash down $0.28. Cutouts helped to offset some of the loss of cash with the cutout value up $0.66. It is too early to tell whether futures may be building support at current levels. Fundamentals are not strong enough to trigger aggressive buying by traders. The Commitment of Traders report is still unable to be issued, leaving us guessing as to the net positions of traders.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded higher last week and feedlots will be holding for higher cash again this week.	1)	Live cattle futures closed lower on the week, even though cash moved higher. Traders might think the market may be running out of steam.
2)	Packers remain short-bought and are somewhat at the mercy of feedlots. There is no interest from sellers for even steady bids. Feedlots will carry this momentum forward.	2)	Higher grain prices may result in feedlots being more willing to move cattle rather than carrying them over and paying more to feed them.
3)	Hog futures might be building some technical support, waiting for confirmation with fundamental support.	3)	Hogs continue to be available with packers only needing to bid higher a few days each week to procure the amount they need for slaughter.
4)	February hogs will cease trading Tuesday with April carrying about an $8.00 premium. There is anticipation of higher cash.	4)	Cash hogs will need to find strength, or the April contract will lose value over time. Current fundamentals do not suggest stronger cash prices anytime soon.

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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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