DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $244.42 +$1.09*

Hogs: Higher Futures: Mixed Lean Equiv: $98.59 -$0.82**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The 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 extended their gains Monday as traders assessed the potential impact of tariffs and refocused on the tight cattle supplies. However, the uncertainty in the market over demand may limit the upside potential near term. Packers have been able to purchase several cattle for deferred delivery, which may limit their aggressiveness this week. It is a holiday-shortened week for trading with the commodity markets closed on Good Friday. This may result in the cash cattle trade earlier than usual. Traders also have the Cattle on Feed report to prepare for, which will be released after the close on Thursday. Traders may position themselves ahead of the report and the extended holiday weekend. Boxed beef prices were higher with choice up $1.41 and select up $1.89. Feeder cattle remain in strong demand in the countryside. Feedlots expect high beef prices to continue.

Hog futures posted nice gains in nearby months despite packers not being aggressive in the cash market. The midday report showed cash was higher, but the result was a decline of $1.11 on the National Daily Direct Afternoon Hog report. Packers are expected to be aggressive Tuesday as they will purchase supplies ahead of the holiday weekend and to maintain the strong slaughter pace. Pork cutouts increased $0.82 on good movement. The May, June, and July contracts closed their chart gaps, regaining the losses due to the escalation of tariffs with China.

	BULL SIDE		BEAR SIDE
1)	The equity markets seem to have settled down after last week's volatility. Traders are turning their focus back on cattle fundamentals.	1)	Cash cattle are expected to trade lower again this week, as packers were able to purchase cattle for deferred delivery, limiting their needs this week.
2)	The June and later live cattle and all the feeder cattle contracts have chart gaps above the market that could be filled sooner rather than later.	2)	The upcoming Cattle on Feed report may limit further upside price potential, as there is always uncertainty ahead of a report.
3)	Even though cash hog prices have declined, the slaughter pace remains strong as packers need hogs to fulfill demand. This keeps hogs from backing up in the country.	3)	Cash hogs have declined substantially, with the weighted average price on Monday down to $81.99. Packers do not need to be aggressive, as sufficient hogs are available to the market.
	Hog futures have regained the losses from the announcement of increased tariffs on China and the retaliatory tariffs China put on U.S. goods. The impact may not be as great as initially perceived.	4)	Hog futures may have difficulty moving much higher after closing the chart gaps in the nearby months.

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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