DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $217.36 +$0.01*

Hogs: Lower Futures: Higher Lean Equiv: $94.85 +$1.03**

*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 futures had a mild opening Thursday, supported by the inventory report. Trading became more active and buyers more aggressive as cash cattle traded higher. Live cattle began trading from $3 to $5 higher with dressed cattle in the North $3 higher than last week. This sets the bar for cash trade Friday. This lit a fire under the market, pushing live cattle futures over $2 higher and feeder cattle over $4 higher in the nearby months. This closed all the chart gaps in feeder cattle futures. This strength should carry through as the inventory report indicated cattle numbers will remain tight for a while. Boxed beef prices were mixed with choice up $0.40 and select down $0.92. Weekly export sales were good but not exceptional at 16,700 metric tons.

Hog futures began the day Thursday holding well, but then succumbed to selling pressure as traders decided to liquidate some positions due to the overbought market. The weekly export sales report was friendly with 42,900 metric tons sold, which was about double the previous week. Recent strong cash suggested possible strong international demand and drove the market higher. But that seemed to be classic buy-the-rumor, sell-the-fact activity. Cash continues to support higher prices with the National Daily Direct Afternoon Hog report up $0.79, moving the weighted average to $63.35. Cutouts showed some nice strength Thursday with the average price up $1.03. Saturday slaughter is estimated at 244,000 head.

	BULL SIDE		BEAR SIDE
1)	Higher cash may push cattle futures higher again Friday. The packers need more cattle to finish out the week and need to purchase some ahead.	1)	It is Friday and the cattle market is overbought. There could be some profit-taking and a price retracement.
2)	The gaps in the feeder cattle charts have now been closed with live cattle having gaps that may be closed over the coming weeks.	2)	Boxed beef prices are struggling a bit. If demand does not continue to improve, the upside price potential might be limited.
3)	Cash has continued to improve for hogs, which should provide support to the futures market.	3)	April hogs could not penetrate the chart resistance Thursday, which triggered technical selling. Continued weakness may be seen Friday.
4)	Strong weekly export sales may continue as international demand improves, especially from China.	4)	Packers may be finished buying for the week, which could result in lower cash hogs Friday.

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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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