DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $177.33 +0.14*

Hogs: Steady Futures: Higher Lean Equiv: $ 98.28 -0.61**

* 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:

Cattle futures closed strong Wednesday led by a strong feeder cattle market. Even though live cattle futures closed higher, they mostly regained the losses on Tuesday. It will take a bit more buying of futures to turn the short-term trend back up. The market may have just completed a nice price retracement. There is some caution to be exercised here as some light cattle trade inked Thursday in the South was done at steady cash with last week. There was a willingness to let go of a few head instead of waiting until the end of the week. This could increase the resolve of packers to not increase bids as this may indicate a little crack in the wall, which could allow them to purchase cattle without having to bid up. Boxed beef did not provide much to get excited about. The February contract is expecting higher cash this week, closing Wednesday at $116.57 with two trading days remaining before April takes over as front-month.

Hogs were on fire again Wednesday with April closing limit up. There should be some follow-through buying to begin the day, but it may not continue if cash remains steady. However, strong cash Wednesday, and so far this week, may not slow down as buyers remain aggressive. Packers are having little difficulty acquiring hogs as higher prices keeps them coming to the market. The strong increase of futures Wednesday seemed to be tied to aggressive short-covering, which may overdo the market to the upside. Cutouts did not support the strength, but a decline in cutouts recently has been short-lived before trending back up again. Saturday slaughter is projected to be 232,000 as plants make up for lost production.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures Wednesday regained most of the loss from Tuesday as traders were willing to buy the break. The overall trend remains up.	1)	The rebound of cattle futures may be in anticipation of stronger cash, but light cash trade Wednesday may indicate otherwise.
2)	Feedlots may be able to force packers to bid higher if they continue to hold for a higher price. Cattle need to be purchased and packers may not be able to afford another week of light business.	2)	April is holding a large premium to cash and will be front-month next week. More of that premium may be eliminated similar to what has already taken place.
3)	Strong cash continues to spur hog futures to higher levels with new highs being made nearly on a daily basis. Traders hold to the adage that "the trend is your friend."	3)	If the strength Thursday is mostly tied to short-covering, that may soon run its course with the market finding itself too high and triggering selling.
4)	Demand remains strong and needs to be filled. Exports remain stronger than expected to China and may remain that way for a while.	4)	Packers have been aggressive, but now may be near having sufficient hogs purchased. Bids may then be no better than steady.

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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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