DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $210.59 -$0.15*

Hogs: Lower Futures: Lower Lean Equiv: $88.23 -$3.50**

*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 had lower cash already factored in, leaving traders positioning ahead of the Cattle on Feed report. The report was expected to be bullish as all categories were expected to be significantly below a year ago. Yet traders were not anxious to buy ahead of the report, even though futures declined over the past two weeks. The weakness of futures and the supportive report will make for some interesting trading Monday. On-feed numbers on March 1 were 96% of a year ago. Placements in February were 93% and marketings were 95% of a year ago. These are bullish numbers in comparison to a year ago but are somewhat neutral compared the trader estimates. Lower numbers have been part of the market for quite some time. Traders generally react to what the actual numbers are compared to the estimates. All categories were below trade estimates with on feed and marketings a bit negative while placements a bit positive. Boxed beef prices were mixed Friday with choice down $0.60 with select up $0.68.

Hog futures initially pushed significantly lower early in trading Friday with liquidation finally running its course, resulting in futures rebounding into the close but still showing some loss except for April. The question today will be if futures have been overdone to the downside with the liquidation last week or are futures now in line with fundamentals. The National Direct Afternoon Hog report on Friday showed cash down $1.22. Cutouts fell $3.54 with weakness in hams, bellies, butts, and loins. Last week, futures fell even though cash and/or cutouts showed strength. Will the opposite be true Monday? That may depend on whether pressure on the outside markets may have an impact on the market or if pork movement was strong over the weekend.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report indicated tighter numbers in all categories compared to a year ago. This is not going to change anytime soon.	1)	The Cattle on Feed numbers were somewhat closely in line with trade expectations. This may leave the market neutral Monday.
2)	April live cattle and March feeder cattle have chart gaps that may be closed with feeder cattle having less than two weeks to accomplish the task.	2)	There will be concern over the strength of cash this week with feedlots rolling over some of the showlists to this week.
3)	Hog futures rebounded significantly from the lows Friday as liquidation ran its course. Buyers may add to their positions Monday.	3)	Lower cash and pork cutouts Friday may limit upside potential of futures as traders assess market fundamentals.
4)	Hog futures are oversold with the magnitude of the drop last week. This may trigger further short-covering and renewed buying.	4)	Liquidation may have run its course, but traders may not be anxious to step back into the market on the long side.

**

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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