DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $245.80 +2.17*

Hogs: Lower Futures: Mixed Lean Equiv: $103.59 +$1.96**

*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:

Cash cattle trade pushed higher with most of the business after the futures market closed Friday. Feedlots held out and were rewarded with live and dressed cattle trading from $2.00 to $4.00 higher. The April and June live cattle contracts closed at new highs, with April leading the way. Record-high prices continue to be established in live and feeder cattle cash and futures. It does not feel like the market has reached a point of resistance for beef prices or feeder cattle being purchased. Packers have been slowing slaughter pace, but that has yet to back-up cattle in the country to where feedlots want to move cattle. The higher weights have only resulted in packers purchasing fewer animals, but still receiving the same tonnage of beef. Tighter supplies and strong demand support the market. The Commitments of Traders showed fund traders as net buyers of 12,089 live cattle futures contracts, bringing their net-long position to 115,353. Traders were net buyers of 2,548 feeder cattle contracts, bringing their net-long position to 27,171.

Hog futures defied gravity with futures closing higher after the market took a breather for one day. The June and July contracts closed at the highest level since Feb. 26. This has renewed the hope that the chart gaps remaining from February may be closed. Poor weekly export sales had little impact on the market, as support may come from better demand moving through the next few months. The National Daily Direct Afternoon Hog report showed cash up $0.08, a surprise for the end of the week. Further support may stem from cutouts gaining $2.18 Friday. The Commitments of Traders report showed fund traders were net buyers of 17,974 hog futures contracts, bringing their net-long position to 55,689.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures are at a discount to cash. The gains in cash cattle last week should support higher prices.	1)	Cattle prices will not continue to make new highs indefinitely. Prices will reach resistance at some point.
2)	New contract high closes in both live and feeder cattle futures should keep traders willing to buy with the trend. Prices have not reached resistance.	2)	Feedlots have been holding cattle for higher cash prices, and those cattle are gaining weight. They may need to move them soon rather than risk a price decline.
3)	Hogs renewed the uptrend after futures took a breather. There has been renewed optimism for increasing demand.	3)	Substantially reduced export sales leave more pork available to the domestic market. This may increase domestic pork supplies.
4)	Hog futures have chart gaps above the market remaining from February. Gaps generally are closed at some point.	4)	Packers do not seem to have difficulty purchasing the hogs they need to maintain the slaughter pace. That may limit the upside price potential.

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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