DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $213.82 -$1.13*

Hogs: Lower Futures: Higher Lean Equiv: $92.78 +$1.18**

*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:

Pressure on feeder cattle was due to corn prices gaining strength as the day progressed. Live cattle closed lower as the market seems tired and will only trade once the strength of cash is seen. Traders do not seem interested in adding premium to the market. The market could be hanging in a balance Thursday with weekly export sales a potential factor in trading activity. Boxed beef prices were lower Wednesday with choice down $1.12 and select down $2.82. Export sales will need to be better than last week, or pressure may be put on the market. Whether these two things will have an impact on cash this week remains to be seen. Cash price cannot increase indefinitely, but strong demand and tighter supply may continue to support the market.

Hog futures have declined since the big jump over a week ago. Traders have not found confidence in underlying fundamentals. Maybe cash and cutouts are an indication the market is changing. However, one day or even a few days does not necessarily indicate a change. The National Direct Afternoon hog report showed cash up $1.59. Cutouts gained $1.16. Slaughter is lighter and there is speculation hog numbers may be tightening. However, the cash market will need to support that idea. Weekly exports sales will influence trade Thursday, along with potentially stronger trade based on Wednesday's afternoon pork reports.

	BULL SIDE		BEAR SIDE
1)	Packers are staring at having to pay more for cattle again this week as feedlots are looking for at least $1.00 to $2.00 higher.	1)	Live cattle futures in April and June have not been able to make new contract highs since the report last Friday.
2)	Feedlots feel confident holding cattle another week will net higher cash, which leaves them in the driver's seat for pricing. Cattle are current and, in some cases, lighter as they are being pulled forward.	2)	Higher corn futures overnight might keep pressure on feeder cattle with further liquidation after a volatile day yesterday.
3)	Strong cash and higher cutouts Wednesday may influence trading activity Thursday. There generally is a delayed reaction to the afternoon prices.	3)	Pork cutouts need to see higher prices again to provide some confidence demand is improving or futures could see further pressure.
4)	Strong export demand would keep packers more aggressive in the cash market from week to week.	4)	If packers are reducing slaughter to improve their margins, hogs may back up, resulting in more supply available to the market.

**

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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