DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $249.96 +4.16*

Hogs: Higher Futures: Mixed Lean Equiv: $103.17 -$0.42**

*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 have no technical price resistance as new all-time highs are being established. The price resistance is left up to the consumer or an unexpected event that would impact the market. Imports of cattle from Mexico might again be in jeopardy as Agriculture Secretary Rollins took a hard line on the New World Screwworm. Boxed beef prices were incredibly strong Monday, with choice up $6.22 and select up $5.01. Packers did not purchase many cattle ahead last week for deferred delivery. This puts them at a disadvantage this week. The recourse is to slow slaughter, but that has not been able to reduce cattle prices. The result has been a tighter retail beef supply and higher prices. The April contract will cease trading on Wednesday, with June taking over as the lead month.

Hog futures made a valiant effort to hold the gains of Friday and accomplished the task Monday. Futures looked a little bleak for a time, but traders became more aggressive buyers. Consistent fundamental support needs to surface for the market to continue the recent uptrend. The National Daily Direct Afternoon Hog report showed cash down $1.25. Pork cutouts struggled, declining $0.42. Hog futures cannot continue to increase without better, consistent demand. The higher slaughter pace continues to provide sufficient pork to the market and limits price potential.

	BULL SIDE		BEAR SIDE
1)	New contract highs in cattle continue to support the bullish sentiment, with traders active buyers.	1)	Cattle futures are overbought and a price correction could take place if traders decide to take profits.
2)	The large increase in boxed beef indicates strong demand even at the high beef prices. Reduced slaughter has resulted in higher retail prices, but no decrease in demand.	2)	Slower beef exports will eventually impact prices as beef could back up in the market.
	Hog futures rejected Monday's early weakness to make new highs. Technically, the futures may have established a level of support.	3)	Demand for pork may have increased, but higher slaughter and heavier weights keep demand satisfied. This may limit upside price potential.
4)	Packers are expected to be aggressive Tuesday as they purchase hogs for their needs. Increased slaughter could make them more aggressive.	4)	Pork cutouts have difficulty finding consistent support. Pork has yet to see a large benefit from high beef prices.

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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