DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $214.70 +2.58*

Hogs: Steady Futures: Mixed Lean Equiv: $129.80 -4.68**

* 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:

Live cattle futures extended their gains Wednesday with prices knocking on the door of making new contract highs. Steady weights and the potential for tighter supplies later in the year is supporting the market. The rise of boxed beef indicates strong demand. Choice cuts jumped $3.50 with select cuts increasing $3.66. Packers had to bid up to obtain cattle with cash generally trading $1.00 higher throughout the country. Feedlots are asking higher prices, but with trade developing Wednesday, it may be difficult to pry more out of packers unless they need to be more aggressive in obtaining supply Thursday or Friday. If futures move to new highs, traders may increase their buying as the trend may be turning up.

Hog futures tried to hold Wednesday but succumbed to selling pressure with one hour of trading remaining. Cash was not the bearish factor as the National Direct Afternoon report showed price up $2.26. Pressure stemmed from the large decline in cutouts of $4.68. There has been a growing concern over China not purchasing pork over the past three weeks, which may leave more pork available to the domestic market. Weekly export sales will need to be good, or the recent price strength may be eliminated. Saturday slaughter is projected at 55,000 head.

	BULL SIDE		BEAR SIDE
1)	Feedlots may be able to hold for higher cash as packers need to step up due to very strong demand and soaring boxed beef.	1)	Cattle futures are nearing technical price resistance, which could keep a lid on the market for the rest of the week.
2)	Live cattle futures are near to testing the recent contract highs with a good possibility of breaking above and extending gains.	2)	If cash does not trade more than $1.00 higher this week, some premium may be taken out of the market, especially if export sales are not supportive.
3)	Hog futures took back much of what was gained on Tuesday, leaving the market in somewhat of a neutral position.	3)	Hog futures need to find support or risk revisiting the lows of last week, setting a bearish tone for the market.
4)	Hog weights remain lighter, indicating supplies are current and the potential for tightening supply continues to be of concern.	4)	Export sales will need to be good or further selling may pressure the market especially if China is absent again.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. 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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