DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $221.62 +$1.78*

Hogs: Lower Futures: Mixed Lean Equiv: $94.67 -$2.14**

*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:

Feeder cattle futures provided support to live cattle futures Tuesday. There were reports of strong cash prices for calves out in the country and buyers were willing to pick them up. Traders seem to be more confident beef prices will continue to trend higher and packers will need to be aggressive. Stronger futures may increase the desire for feedlots to hold for higher prices. Boxed beef was strong with choice up $2.99 and select up $1.80. The recent strength of boxed beef has been consistent, which has moved choice back above $300 where it has not been for about two months. Cattle futures turned and closed at new highs again, keeping the trend higher. This may bring more aggressive buying into the market again Wednesday.

Hog futures moved lower briefly after opening higher. That was short-lived as aggressive buying surfaced on the idea of better demand. That may have been reflected in the cash market as the National Daily Direct Afternoon Hog report showed a gain of $0.81. However, that was not reflected in cutout values as they declined $2.14. The bigger influence in the market may have been technical as futures pushed solidly above chart resistance, triggering short-covering. That may provide more confidence to traders to increase their long positions. There may be further follow-through buying Wednesday, but it will need to be supported by higher cash.

	BULL SIDE		BEAR SIDE
1)	The uptrend seems to have resumed in cattle futures with futures closing at the highest level in nearly two months.	1)	Cattle were backed up in feedlots over the past two weeks due to adverse weather conditions. Even though cattle lost weight, packers know they will be coming to the market and may remain less aggressive.
2)	Strong boxed beef prices continue to provide support. Packers must purchase cattle to maintain slaughter schedules and meet that demand.	2)	Packer margins have been improving and they will want to keep that going, which may leave them unwilling to bid cash higher this week. Reduced slaughter has improved boxed beef prices.
3)	Hog futures pushed above chart resistance, which may trigger further short-covering and renewed buying interest.	3)	The large gains in hog futures seen through the first half of the year were not fundamentally supported. The strength may be short-lived.
4)	There is optimism that demand may improve both domestically and internationally. Hog production may scale back in China due to their ongoing production problems.	4)	The weakness in cutouts Tuesday may limit further gains in futures as the market will need to prove that higher prices will not reduce demand.

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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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