DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $217.35 -$0.45*

Hogs: Lower Futures: Higher Lean Equiv: $92.47 +$2.37**

*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 have not traded so far this week, which provided support to the market Thursday. Feedlots are holding for higher cash and, with lower carcass weights and less expensive feed prices, they can afford to do it. Feedlots were not waiting for the WASDE report for information that might be bullish as these are estimates from USDA and can change from month-to-month. They are just waiting for the packers to step up because they need cattle. The WASDE report was friendly as USDA estimated quarterly steer prices to range from $1 to $3 higher than their previous estimates. Beef production was increased and imports were raised. This indicates there is an expectation for stronger consumer demand as exports remain unchanged. Boxed beef was mixed with choice up $0.03 and select was down $1.30.

Hog futures were under pressure as packers were not aggressive in the cash market. This trickled down into the futures, resulting in more aggressive selling. The National Daily Direct Afternoon Hog report showed a decline of $1.31. Cash may be weaker Friday as packers seem to have purchased much of what they needed for the week. Exports sales were good at 39,200 metric tons (mt) but that did not seem to provide support to the market. China was the top buyer, supporting the idea that they would be purchasing more pork as they trim their herds. USDA estimates hog prices to be $1 to $2 higher this year compared to their estimate last month. Pork imports were reduced by 20 million pounds while exports were raised by 210 million pounds. Pork cutout values increased $2.37.

	BULL SIDE		BEAR SIDE
1)	Cattle futures pushed to new highs with the June contract closing the chart gap. February and April have yet to close the gap.	1)	Live cattle futures already have higher cash factored in. Once cash trades, traders might liquidate and take profits into the weekend.
2)	Feedlots are waiting for higher cash, which will develop Friday. The packers will be forced to pay more as they need cattle. They do not have many cattle purchased ahead.	2)	Cattle futures have not corrected from being overbought, which may trigger increased selling on a technical basis and a price retracement.
3)	Strong export sales should provide some support to the market. China is stepping up to purchase more pork as anticipated.	3)	Hog futures just cannot find sufficient buying interest from traders with selling pressure forcing further liquidation.
4)	Higher cutouts may be traded Friday as the recent price break may be a buying opportunity for traders to position for the long term.	4)	Strong export sales and positive estimates in the WASDE report for pork prices and exports could not turn the market. Traders have become more bearish recently.

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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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