DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $204.36 +$0.79*

Hogs: Higher Futures: Mixed Lean Equiv: $91.70 +$0.82**

*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:

The cattle complex showed strong optimism early Monday, only to see the buying interest wane as the day progressed. This keeps the market in the trading range it has recently developed. The winter storm seems to have been factored into the market, resulting in little support from that event. No bids or offers were posted Monday, as usual, leaving traders guessing as to cash activity. Feedlots will hold for at least steady cash. Packers may need to step up to the plate to procure the needed cattle for slaughter. Boxed beef was mixed with choice up $1.67 and select down $0.17. Feeder cattle contracts were mixed with some spreading activity putting pressure on the May and August contracts.

Hog futures were able to post another day of gains, pushing contracts to the top end of the trading range. If it has been a short-covering rally by the funds, it may cease moving higher Tuesday. If it is the result of traders establishing long-term positions, prices will hold and begin to trend higher. The National Daily Direct Afternoon Hog report showed cash up $0.34, moving the weighted average to $44.90. Cutouts also found strength with a gain of $0.82. Generally, this will provide support to trading activity Tuesday, but the past three days of gains may have this factored in.

	BULL SIDE		BEAR SIDE
1)	Cattle futures seem to be building support as the market continues to move sideways. Higher cash trade might trigger more long-term buying interest.	1)	The inability of cattle futures to hold early, higher prices may indicate upside price potential is limited for the time being.
2)	Both live and feeder cattle futures have charts gaps significantly above the current market. Chart gaps are usually filled at some point.	2)	Boxed beef prices still lack solid footing. Packers will not be very willing to bid higher to procure the beef they need.
3)	Hog futures have rebounded substantially over the past three days. Greater demand optimism may be developing.	3)	The 3-day rally of hog futures has not been supported by fundamentals but more so by short-covering and optimism. That may provide shaky support.
4)	Higher cash hogs and cutouts on Monday could provide further support Tuesday as packers may remain aggressive.	4)	Short-covering by fund traders generally lasts three days and the market stabilizes or corrects. This is day four.

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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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