DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $287.51 +$0.84*

Hogs: Lower Futures: Higher Lean Equiv: $103.98 +$2.06**

*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 traded developed on Thursday and carried through the end of the week, posting prices from $2.00 to $4.00 higher. This resulted in another week of record-high cash. However, the futures did not follow suit as both live cattle lost about $4.00 and feeder cattle futures were almost $8.00 lower. This would give the impression that the market may be tired, with traders willing to reduce their long positions on the possibility that these prices will impact demand. So far, that has not been a reality as choice boxed beef was up $1.45 at $388.39 and select was up $0.59 at $385.01. Some time ago, boxed beef prices were over $400 when cash cattle prices were lower. This indicates how much packers are running at a loss. This may not be sustainable over the long term. Feeder cattle remain in strong demand in the country as feedlots are paying a premium over the market in many cases. The Commitment of Traders report showed fund traders added 6,458 live cattle futures, bringing their net-long positions to 138,018. They added 1,913 long futures to feeder cattle, increasing their long positions to 20,521.

Hog futures fared better than cattle, with limited losses for the week. The fundamentals throughout the week were not very friendly for the market. Traders seemed to indicate that enough is enough and decided to support the market. Both cash and cutouts were positive on Friday, which may support the market today. The National Daily Directs Afternoon hog report showed cash up $3.07 on limited trade volume. Pork cutout values increased by $1.96. This certainly does not indicate that support has been reached and that the trend will change. However, continued higher slaughter may eventually tighten supplies, and prices will then move higher. The Commitment of Traders report showed the funds as sellers of 7,414 futures contracts, reducing their net-long position to 38,687.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures are at a significant discount to cash. Traders may support the market this week.	1)	Cattle futures closed lower for the week despite higher cash. This could mean that the market is running out of steam.
2)	Cattle futures corrected from being overbought, with the potential of a further correction this week.	2)	The cattle market may be at the beginning of a larger correction as stronger cash has not supported futures.
3)	Hog futures held well last week, which may indicate that the market may be establishing a bottom.	3)	The strength of cash hogs on Friday may be short lived as packers will see how many they can purchase today at lower prices.
4)	Cash hogs were strong to close the week on limited sales. Packers may be aggressive to begin the week as they will need hogs to maintain increased slaughter.	4)	Traders have yet to see consistent support in the hog market.

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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