DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $212.10 -$0.53*

Hogs: Lower Futures: Higher Lean Equiv: $95.62 +$0.73**

*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:

Cattle futures opened lower and briefly tried to move higher at some point only to fall back into the close. There has been some anticipation of cash cattle trading steady this week, which put some pressure on the market. However, weekly export sales were dismal, making it three weeks in a row of low sales. The amount of beef sold was a marketing year low, down 31% from last week. Added to that was further weakness of boxed beef with choice down $0.18 and select down $2.07. There was not a high volume of cash cattle trades Thursday, but trading taking place at steady money might set the stage for activity for the week. Feeder cattle declined even though corn prices fell substantially. Feeder cattle futures might be in the beginning stage of a price correction from the overbought technical position.

Spread trading dominated hog futures Thursday. Weekly export sales were not as good as hoped, totaling 22,100 metric tons (mt), down 29% from the previous week and 44% below the four-week average. China was not one of the top buyers. Cash did not provide any help as the National Direct Afternoon Hog report showed a decline of $0.44. Support came from an increase in cutouts of $0.73. However, this did not support futures across the board with some unwinding of the spread of April and later months. Summer futures contracts were purchased with later contracts sold. This may be a way traders might be positioning themselves for the longer term in the market and limiting their risk. Saturday slaughter is estimated at 107,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle trading at steady money should provide some support to the market as price is holding. There is a chance some cattle could trade a bit higher to end the week.	1)	Feeder cattle futures not being able to push higher even with the large decline of corn prices indicates the market might be correcting from being overbought. Further liquidation could continue.
2)	It is healthy for a market to correct from an overbought status. Feeder cattle could not make new highs forever. The weakness Thursday might be temporary.	2)	Marketing-year-low export sales was very disappointing. The current ban of Brazilian beef to China is not having any impact on export sales.
3)	Traders might be becoming more friendly to the hog market with spread trading by buying the summer months and selling the later months. This is a way to position for the long-term minimizing risk.	3)	Cash hogs have not been able to trend higher, continuing to remain in a choppy pattern. Packers can readily obtain supplies.
4)	June, July, and August hog futures had a large price range Thursday and managed to close higher. Further buying might continue Friday.	4)	Reduced weekly export sales sent up a red flag for traders as lower exports may back up supply in the domestic 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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