DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $218.41 +1.49*

Hogs: Lower Futures: Higher Lean Equiv: $95.90 +$3.88**

*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:

Live cattle futures regained some if not all the loss of Wednesday as the market tried to find a level of equilibrium after more cash trading activity developed. The hopes that lower early cash trade would not hold dissipated Thursday as further activity developed $1 to $2 lower. Weekly beef exports maintained some demand concern in the market as beef sales of 16,600 metric tons (mt) were reported, down 19% from the previous week. The positive development was the gain in boxed beef prices. Choice increased $1.30 with select up $3.87. More strength needs to be seen in boxed beef or futures could have a difficult time seeing much more upside in the near term.

Hog futures were the recipients of further buying interest with contracts nearly matching the previous high on Jan. 30. If this level is breached, further buying interest might unfold. Otherwise, technical traders could use this as a selling point due to double-top formation. Weekly export sales certainly should provide strong support overall with sales of 71,900 mt, which was 83% above the level of a week ago. The anticipated increase in export demand seems to be coming to fruition. Cutout values increased by $3.88. The negative aspect of Thursday was the decline in cash of $0.87 after a strong morning of cash prices. Saturday slaughter is estimated at 119,000 head.

	BULL SIDE		BEAR SIDE
1)	The rebound of live cattle futures was good as traders desired to support the market since the outlook for cattle has not changed.	1)	Lower cash cattle trade this week may keep a lid on price potential and provide feedlots with more confidence to hold prices next week.
2)	There are chart gaps above the market that may be filled at some point. A move above the highs of Monday could propel the market higher and accomplish that task.	2)	Beef exports have been slowing, which may be the result of prices being too high. If domestic demand slows, beef prices will come down.
3)	Exceptional pork export sales in Thursday's report solidify the anticipation of higher pork exports as international demand improves.	3)	The very strong export sales report was not able to trigger aggressive buying interest. This may have already been factored in.
4)	Slowly improving cash prices for hogs and lower slaughter numbers may indicate hog numbers may be tightening.	4)	Hog futures will need to push higher and break above the highs of January 30th or technical traders may sell more aggressively.

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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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