DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $224.50 -$0.13*

Hogs: Higher Futures: Higher Lean Equiv: $108.07 +$2.67**

*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:

Most of the cattle purchased last week were for immediate needs with a limited amount purchased for deferred delivery. This should leave packers aggressive again this week with cash trade likely taking place earlier rather than later. However, it is the week of the Cattle on Feed report, which does have the tendency to push cash cattle trade to the day of the report, even though it may not make any difference. The report, whether bullish or bearish, may not impact trade very much. We have seen some bearish reports a few times over the past year, yet cattle prices continue to make new highs. Funds traders are net long the market and are comfortable holding those positions. Boxed beef prices were mixed with choice down $0.39 and select up $0.29.

Cash hogs were able to trade higher Monday, which was a change from what it has been recently. The National Direct Afternoon Hog report showed a gain of $0.33. With a positive beginning to the week, it is likely cash may trade higher again Tuesday as packers remain aggressive. The gain of $2.67 in pork cutouts should provide some buying interest in hog futures Tuesday as it may provide an opportunity to scalp the market for a profit as futures many times follow the direction of cutouts. Slaughter continues to remain strong, indicating both ample supply of hogs and good pork demand. This should keep hogs current.

	BULL SIDE		BEAR SIDE
1)	Cattle futures took a breather Monday, which may be short-lived as packers do not have many cattle purchased ahead for deferred delivery.	1)	The decline of cattle futures despite higher cash prices last week and lower corn prices yesterday may indicate the market is overpriced.
2)	Lower grain prices could provide support to feeder cattle futures Tuesday as that is a correlation which is traded.	2)	Cattle futures may be choppy ahead of the report to be released Friday.
3)	Higher cash hogs Monday is a good sign packers need to be more aggressive as they need to satisfy increased demand.	3)	Hog traders do not see a consistency in cash and cutouts to provide for a steady price uptrend.
4)	Hog slaughter is aggressive, running above a year ago and the previous week. This will keep hogs moving and supply from backing up.	4)	Packers have sufficient hogs available, eliminating the need to become very aggressive in the cash 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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