DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $202.30 +1.55*

Hogs: Steady Futures: Higher Lean Equiv: $116.63 -2.40**

* 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 continue to struggle. Traders seem to have lost their confidence in the market and are reducing some of their long positions. It is unclear as to why the market has not been supported over the past week other than pressure from feeder cattle that has been pressured by higher grain prices. Once cash cattle were traded significantly higher last week, it seemed as if the market ran out of steam. Boxed beef prices have been strong this week, indicating continued strong demand, but packers still have not indicated as to what price they are willing to purchase cattle. The general consensus is for $1.00 to $2.00 higher, but the market cannot be completely sure at this point. Weekly exports will be an important part of price direction. If these remain low, then there may be more supplies for the domestic market, limiting upward price potential. One thing for sure is that it will be difficult to regain what has been lost over the past week.

Hog futures came to life Thursday, reducing the concern that a top may have been established. The market still has its work cut out in order to reach back to new highs, but Wednesday's action provides hope. Cash was slightly lower with cutouts significantly lower, but the market seemed focused on tightening supplies. The market may have found some minor strength from the increase in China's hog price. Hog prices in the country have been weakening for a period of time potentially as a result of farmers selling due to continued problems with Africa swine fever. With prices turning higher, it could indicate liquidation of the herd is finished, leaving less available pork for their market. This may increase China's appetite for U.S. pork. However, that is a big "if." Projected hog slaughter for Saturday is 77,000 head.

	BULL SIDE		BEAR SIDE
1)	The liquidation over the past week has moved cattle futures into oversold territory, which could increase the interest of traders to re-own futures again due to strong fundamentals.	1)	Weak technical action in cattle futures has gained momentum, which may be difficult to reverse.
2)	Feedlots seem to be determined to capitalize on the recent strength of cash and will hold out for higher cash this week.	2)	Futures indicate the rise of cash cattle prices might have run its course for the time being. Continued higher feed prices may cause feedlots to market more aggressively.
3)	The rebound of hog futures paints a bullish picture for the market. Traders continue to buy the break in anticipation of strong demand both in the U.S. and abroad.	3)	The choppy action of cash and cutouts could indicate the market is near a top. Packers are not bidding higher consistently as they once were.
4)	Traders are looking past the dip in cash Wednesday and in lower cutouts. The concern of tightening hog numbers is very much of a concern.	4)	If the export sales report shows signs of slowing and China is again not in the top three buyers, hog prices may have a difficult time moving back to the highs.

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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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