DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $219.85 +$2.31*

Hogs: Higher Futures: Mixed Lean Equiv: $96.81 +$1.61**

*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 showed uncertain trade throughout Monday as traders did not know what to do after the neutral Cattle on Feed report. Some of the trading activity was confined to spread trading with nearby months showing losses and later months showing gains. Indications are packers may need to be more aggressive with their purchases this week, but whether that will result in higher prices is too early to tell. No interest was shown with bids or offers on Monday, leaving traders uncertain. Boxed beef was higher with choice up $3.17 and select up $3.53. The recent strength of boxed beef may require packers to be more aggressive as demand needs to be met.

Hog futures showed some spread trading, but that was limited, leaving the market with limited price changes at the close. Traders are not certain over cash with the National Daily Direct Afternoon report showing a decline of $0.09. Packers may want to be more aggressive early in the week to purchase what they need rather than waiting until later in the week. Cutouts did well Monday with a gain of $1.61. Traders may be more confident Tuesday to buy futures as slaughter is back on track and the higher cutouts may indicate demand is good as retail needs to replenish supply.

	BULL SIDE		BEAR SIDE
1)	Packers did not purchase many cattle last week and do not have many purchased ahead. They may need to step up more aggressively this week.	1)	Feedlots may want to move more cattle with the milder weather rather than hold on to those that should have been moved the past two weeks.
2)	Strong boxed beef prices recently may indicate improving demand, which will need to be met.	2)	Packers will want to improve their margins and may not bid higher, even though boxed beef is stronger.
3)	Improving pork values may give traders the confidence to buy into the market in anticipation of continued strength.	3)	Hog futures have been trending lower since they could not push through and hold above price resistance. That may keep the upside price potential limited.
4)	Overall cash may be supported this week as packers purchase hogs with slaughter moving back on track again.	4)	Pork exports are estimated to be up 1.5% this year in comparison to an increase of 7.0% last year.

**

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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