DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $242.94 -$1.05*

Hogs: Higher Futures: Mixed Lean Equiv: $101.55 -$0.61**

*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:

It was an impressive day for cattle, with most contracts closing over $2.00 higher. The April live cattle contract moved to a new contract high at $211.37. This contract has one week to trade, and traders expect cash to remain strong. The other live cattle contracts are knocking on the door of new contract highs. Boxed beef was not supportive on Tuesday, with choice down $1.79 and select down $1.12, but that may have limited impact on the market today. The strength of futures will increase the confidence of feedlots to hold for higher cash this week. The packers did buy some cattle ahead, but it may not have been enough to leave them in the driver's seat. Feeder cattle are in strong demand, with sharply higher prices at auctions.

Hog futures moved above technical resistance, triggering short-covering and renewed buying interest. The strength has been impressive, moving the June and July contracts above $100.00, where they have not been since February 26. Traders may continue to trade with the trend as the previous resistance is now supported. The packers were aggressive on Tuesday, with the National Daily Direct Afternoon Hog report posting a gain of $6.41, moving the weighted average price to $90.00. The packers will need more hogs and may bid higher today, but likely not as aggressively. Pork cutouts were down $0.61, but the past two days of weakness in the cutouts were minor compared to the large increase on Friday.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have nearly eliminated the losses since the beginning of April, with the April contract making a new high. Traders will continue to trade the trend.	1)	Live cattle futures could reach resistance at the previous highs. After all, the market cannot move higher forever.
2)	The large increase in cash cattle trade last week indicates strong demand, keeping the packers aggressive as demand needs to be met.	2)	The packers may not be willing to bid higher this week, as they were able to purchase some cattle for deferred delivery.
3)	The large jump in cash hogs on Tuesday indicates holiday demand was good, and supplies need to be replenished. The packers may bid higher today to obtain what they need for slaughter.	3)	The packers aggressively bid for hogs on Tuesday, but once their needs are filled for the week, prices may fall back.
4)	Hog futures moved above technical resistance, which could increase the buying interest of traders.	4)	Lower pork cutouts do not indicate a consistent improvement in demand.

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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