DTN Early Word Livestock Comments

Cattle: Lower Futures: Lower Live Equiv: $289.52 -$3.83*

Hogs: Lower Futures: Mixed Lean Equiv: $102.36 -$0.57**

*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 closed lower with pressure developing. The choice boxed beef price fell nearly $8.00 in the morning report. The afternoon boxed report showed choice down $8.22 with select up $0.99. Concern was developing over the continued strength of demand due to escalating beef prices and improving packer margins. Either consumers were going to reach a price resistance or slaughter would increase to meet the continued demand. That question may have been answered on Wednesday. However, one day's trade does not mean much in the big picture. Traders have wavered in their anticipation of a steady to higher cash cattle trade this week and see the potential for lower cash to develop. Today is the last day to trade March feeder cattle.

Hog futures were mixed as traders did not want to press the market lower, nor did they see anything to increase their buying interest. Futures hung around the support level with traders finding no solid direction. The National Daily Direct Afternoon Hog report showed cash down $0.97. Lower cash was expected and will likely be seen today as well. Pork cutouts declined $0.57. The Quarterly Hogs and Pigs report will be released this afternoon. The average estimates for the report are for all hogs and pigs on March 1 at 100.9%, with estimates ranging from 100.1% to 101.5%. Hogs kept for breeding at 99.8% with a range of 99.4% to 100.3%. Hogs kept for marketing at 101.0% with a range of 100.1% to 101.7%. The largest increase compared to the previous year is the December-February pigs crop with an average estimate of 102.0%.

	BULL SIDE		BEAR SIDE
1)	The large decline in choice boxed beef may only be temporary and will rebound, providing support to the market.	1)	Packers continue to hold a reduced slaughter pace, attempting to maintain better margins.
2)	Cash cattle have not yet traded this week, and steady prices may provide the support needed for traders to turn aggressive buyers.	2)	The large drop in choice boxed beef may indicate that beef prices may have reached a threshold.
3)	Hogs futures held around the support level. Traders did not liquidate positions even though the June and July contracts closed below support on Tuesday.	3)	Hog futures are at or near major technical support, and increased selling pressure could trigger liquidation.
4)	The weekly average hog weights declined to 290.5 pounds, down 0.5 pounds from the previous week. Weights are now 0.2 pounds below what they were a year ago.	4)	A negative Hogs and Pigs report could push futures lower as fund traders could liquidate more of their long positions.

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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