DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $206.83 +$2.22*

Hogs: Higher Futures: Higher Lean Equiv: $90.32 +$2.12**

*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:

Feedlots held for the win last week with cash trading higher. Waiting it out resulted in Southern trade $2.00 higher while Northern trade was $2.00 - $3.00 higher. Even when packers are able to purchase an amount of cattle for deferred delivery, they still cannot avoid that fact that market ready cattle are not plentiful and higher prices are what is needed to purchase what is available. The same is going to be true this week as cattle numbers and fundamentals are not going to change anytime soon unless there is some unforeseen event that would be of major consequence. Boxed beef continues to show strength after a rocky start to the year with choice up $1.49 and select up $3.25 on Friday. Markets were not open Monday, but choice cutouts gained $1.85 with select up $2.16. The Cattle on Feed report will be released Friday, keeping some thoughts focused on that.

Hogs could not get much going Friday with contracts through October lower and later contracts slightly higher. Trade seemed to drift with little interest ahead of the three-day weekend. Weaker cash and cutouts did not help generate any excitement. The National Direct Afternoon Hog report showed cash down $0.33. Cutouts lost $0.97 to finish the week on a negative tone. However, the previous National Direct Afternoon Hog report showed cash up $1.48. Cutouts showed an impressive gain of $5.63 with bellies leading the charge higher, posting a gain of $25.03. This should have a positive influence on the trading activity Tuesday.

	BULL SIDE		BEAR SIDE
1)	Higher cash is expected again this week as packers are not able to purchase supply without paying more.	1)	The cattle market is overbought and funds are likely extremely long, which could trigger some selling ahead of the Cattle on Feed report.
2)	Feedlots do not have an abundance of cattle walking around that just have to be moved. Marketings are current and are not being pulled forward.	2)	Boxed beef prices may reach buyer resistance at some point as consumers continue to see high food prices.
3)	Hog slaughter is holding well, and pork is moving. Futures seem to have found support after setting the lows of about two weeks ago.	3)	Hog futures settled back the second half of the week, unable to find support to continue early strength.
4)	Strong cash and cutouts should be positive for trade Tuesday. It is usually traded the following day after the final print of the previous day is reported.	4)	There needs to be more consistent strength of cash and cutouts before the market will trend higher.

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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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