DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $210.00 +$2.03*

Hogs: Lower Futures: Lower Lean Equiv: $91.22 -$2.13**

*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:

Cash cattle trade has been limited so far. One reason is feedlots and packers are not agreeing on a price and the other is that livestock may not be put out for sale this week due to the adverse weather. Cattle slaughter will be quite a bit lower, but that may not support price as demand may be affected. However, beef demand has been good this week, as reflected in boxed beef. Boxed prices increased significantly Thursday with choice up $2.82 and select up $3.00. Most cattle sales so far took place in Iowa at steady money with last week while a limited volume of cattle in Nebraska traded $2.00 lower. Cash could go either way, but it seems to be leaning toward mostly steady trade. Many traders will have their attention focused on the WASDE and Quarterly Stocks reports, due out at 11 a.m. CST Friday.

Hog futures spent much of their time in negative territory but were able to climb to a positive close in most contracts. This put the close slightly above chart resistance, but not yet enough to feel confident traders will buy more aggressively. There could be some profit-taking ahead of the three-day weekend as the markets are not open Monday due to the Martin Luther King Jr. holiday. August was unchanged with October and December down slightly. Futures may struggle in reaction to lower cutouts. Cutout declined $2.12 with most of the losses in hams and butts. The National Daily Direct Afternoon Hog report showed cash up $0.22 as packers have been trying to purchase sufficient hogs for slaughter. Weekly exports sales were good at 23,300 metric tons (mt) to begin the marketing year. Saturday hog slaughter is estimated at 256,000 head but that may be lower due to weather problems.

	BULL SIDE		BEAR SIDE
1)	Cattle futures remain in a sideways pattern, which seems to be building support. Feedlots may hold back cattle due to the weather, which could increase bid prices to access those cattle.	1)	If cash trades lower this week, as was seen in a few sales which took place Thursday, futures could fall back.
2)	Recent strong boxed beef prices indicate demand may be increasing after a period of slow movement.	2)	Cattle futures have not been able to break above chart resistance, keeping them confined to a sideways range.
3)	Hog futures closed slightly above chart resistance with that level now becoming support. Higher prices may trigger a round of short-covering.	3)	Hog futures have increased six consecutive trading days and may be ready for a retracement with some traders taking profit ahead of the three-day weekend.
4)	Packers have been more aggressive this week, which could indicate demand is improving and hog supply might be tightening.	4)	Pork cutouts Thursday eliminated the gain of Wednesday as retail has replenished supply and increased consumer demand has been met. Traders often trade the direction of cutouts the following day.

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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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