DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $269.43 -$0.14*

Hogs: Lower Futures: Lower Lean Equiv: $124.11 -$1.37**

*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:

Most cattle futures contracts closed at new contract highs Tuesday. Live cattle contracts through the rest of this year closed under pressure, but not enough to cause concern for Wednesday's trading. The primary focus for traders will be the Cattle on Feed report and the semi-annual Cattle Inventory Report, both to be released Friday. Analysts estimate on-feed numbers at 99.1% of a year ago; placements are estimated to average 98.1%; and marketings at 96.1%. Cattle marketed are expected to be fewer due to tighter numbers, resulting in lower slaughter. Traders may begin to even up some of their positions Wednesday rather than wait until they are closer to the reports. Cash cattle are not expected to trade until late in the week. Boxed beef prices on Tuesday were mixed with choice up $0.43 and select down $2.11. Boxed beef continues to struggle, but traders view it as temporary.

Hog futures are trying to maintain the uptrend but are having difficulty generating strong buying interest. Cutout prices have been trending higher, but it has not been sufficient to trigger greater buying interest from traders. Pork cutout values declined Tuesday, with values down $1.37. The National Daily Direct Afternoon report showed cash falling $3.48. It was expected to hold the gains of Monday and to add to those gains to recover the losses of Friday. Packers are trying to improve margins and are not willing or do not see the need to be aggressive buyers in the cash market. Light spread trading took place on Tuesday.

	BULL SIDE		BEAR SIDE
1)	New highs in most cattle contracts keep the uptrend intact and traders confident being long the market.	1)	Packers have a supply of cattle already on the books and may not need to be aggressive in the cash market this week.
2)	Lower on-feed and placements are expected in the Cattle on Feed report. This may continue to support the market.	2)	Boxed beef prices continue to struggle. This will eventually impact cattle futures as demand may be slowing.
3)	Most hog contracts closed higher Tuesday, maintaining the uptrend. The recent strength in cutouts indicates improving demand. The decline Tuesday is expected to be short-lived.	3)	The decline in cash Tuesday with a large amount of hogs traded, does not indicate supplies are tightening. Packers purchased hogs at lower prices without difficulty.
4)	There is an indication of tighter hog supplies. This could provide increasing support over time.	4)	Pork demand needs to remain consistent or the upside price potential will be limited.

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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