DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $227.64 -$0.32*

Hogs: Steady Futures: Mixed Lean Equiv: $99.63 -$0.84**

*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 traded lower before the close of the futures market Thursday, but that did not seem to have much impact on the market as live cattle futures closed with triple-digit gains. Maybe traders were in denial that the bulk of cattle would trade lower for the week. However, trade continued to develop for the rest of the week, ranging from $2 to $3 lower. Boxed beef prices Friday were mixed with choice down $1.64 and select up $2.26. Traders may begin the week with caution and uncertainty over boxed beef prices. Weekly exports were nothing to write home about at 12,700 metric tons (mt) but were higher than the previous week. Packers continue to run slower slaughter speeds, attempting to increase margins. However, it does not seem cattle are backing up in the country. The avian flu has been confirmed in a dairy herd in Idaho adding to the states of Texas, Kansas, and Michigan that have confirmed it. It is uncertain what impact this could have, if any, on beef cattle. The Commitment of Traders report showed funds as net sellers of 1,019 futures contracts in live cattle bringing their net-long position to 65,711 contracts. Funds were sellers of 2,637 contracts in feeder cattle bringing their net-long futures positions to 7,985 contracts.

Hog futures will react to the Quarterly Hogs & Pigs report, but it is unclear what the reaction will be. The overall report was neutral to bearish, which would likely put pressure on the market. Traders had positioned themselves ahead of the report and given the fact that it didn't show numbers that were resoundingly bullish or bearish, the market could open lower and then regain the losses as traders turn toward current fundamentals. Cash hogs increased significantly Thursday with a gain of $2.21. The change in cash was not reported Friday due to limited slaughter taking place. Cutouts were lower Friday with a decline of $0.86. Weekly export sales were phenomenal with a marketing-year high of 55,300 mt. The Commitments of Traders report showed funds increasing their net-long futures position by 2,015 contracts, bringing their net-long positions to 63,741 contracts.

	BULL SIDE		BEAR SIDE
1)	Futures closed higher Thursday despite cash cattle beginning to trade $2 to $3 lower than the previous week. This had been factored in.	1)	Cattle futures may have a difficult time regaining the losses of last week after cash cattle traded lower. Traders may not be as willing to buy back into the market.
2)	Cattle futures may regain more of the losses from last week as traders have digested the Cattle on Feed report and are focusing on cattle supplies and consumer demand.	2)	The strength of boxed beef may have run its course as consumers may have reached a threshold. Boxed beef prices may be choppy at best.
3)	Strong demand for pork continues to support the market with increasing cash and strong international interest.	3)	The bearish categories of the Hogs & Pigs report may be the focus of traders to begin the week.
4)	The slight bearishness of the Hogs & Pigs report may already be factored into the market.	4)	Packers may not be willing to aggressively purchase hogs to begin the week. They will wait to see product movement over the weekend to determine how aggressive they will be.

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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