DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $223.32 +1.15*

Hogs: Higher Futures: Mixed Lean Equiv: $98.15 -$1.53**

*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 had a tough Wednesday with futures generally opening lower and remaining that way most of the day. Some cash cattle traded in the South at even money with last week. Hopefully, cash will not trade lower, or futures could see further pressure. Thursday is the last trading day for February live cattle and it does not look as if it will close the chart gap, which it was so close to accomplishing the past few days. Boxed beef is providing some support as choice was up $1.29 with select up $2.54 on Wednesday. This indicates demand is holding for now. Feeder cattle futures had a larger price correction with contracts through May more than $3.00 lower. Feeder cattle and calves continue to command higher prices at auctions as supplies are tight.

Hog futures were able to close slightly higher Wednesday, but could not hold the strength of the day. However, this continues to provide support to the market, keeping the uptrend intact. The weekly export sales report Thursday morning needs to show strong exports to keep the bullish sentiment alive. The National Daily Direct Afternoon Hog report showed a gain of $1.77, moving the weighted average to $74.47. Cash may likely trade higher Thursday as packers need to finish up purchases for the week to maintain the strong slaughter pace. Cutouts took a hit Wednesday with values down $1.53. Trading in futures could be mixed as traders assess stronger cash with weaker cutouts.

	BULL SIDE		BEAR SIDE
1)	Steady cash cattle trade should provide support under the market with the April contract maintaining a premium.	1)	If cash cattle trade is steady this week, the upside price potential of futures may be limited.
2)	Feeder cattle remain in demand at auctions with tight supplies and optimism over higher beef prices.	2)	A greater market correction is possible to relieve the overbought technical condition of futures. Further liquidation could take place Thursday.
3)	Hog futures continue to trend higher with fundamentals friendly to the market for the time being. Traders continue to add to their long positions.	3)	Hog futures could reach a plateau and begin to develop a sideways trading pattern for a time.
4)	Export sales have been supportive with good export sales expected in Thursday's report.	4)	If export sales slow, it could begin to change trader sentiment as more international demand provides some support to the market. If prices become too high, export demand may decline.

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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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