DTN Early Word Livestock Comments

Cattle: Higher. Futures: Higher. Live Equiv: $203.49 -$0.74*

Hogs: Higher. Futures: Mixed. Lean Equiv: $113.99 -$0.20**

*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:

Feedlots hoped they could see packers open their wallets and pay more for cattle this week, and that is what happened. Trade in both the North and South was generally $2.00 higher. Live cattle futures had that factored in, which leaves it in position to remain choppy for the rest of the week unless packers need more and will pay more to get them. However, with some cattle contracted for later delivery, the trend has likely been set for the week. Packers are not only purchasing for now but also for the next few weeks. Boxed beef was lower with choice down $0.75 and select down $1.74 maintaining only about a $3.00 spread between the two.

Hog futures pushed higher Wednesday with contracts posting a new higher close. The uptrend remains intact after being tested earlier this week. Further gains on the National Direct Afternoon Hog report of $2.06 provided strong support. It is likely packers may hold back the rest of the week, but with a strong slaughter pace, they may remain aggressive for another day. Cutouts slipped $0.20 leaving traders focusing on technical strength and cash strength. Weekly export sales need to be strong, or futures could face another price retracement. Saturday slaughter is always difficult to pin down so the current estimate has a range of 155,000 to 160,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded higher, indicating packers need cattle now and for the next few weeks.	1)	Cattle futures already have higher cash factored in, which could leave trading lethargic the rest of the week.
2)	Livestock futures are holding in a sideways trading range, building technical support.	2)	Continued weakness of boxed beef may eventually be an anchor weighing on the market, leaving packers less willing to pay higher for animals.
3)	Hog futures established new contract high closes, keeping the strong uptrend intact. Traders are confident of higher prices yet to come as supply tightens.	3)	If weekly export sales are less than stellar, futures could come under pressure.
4)	Increasing slaughter pace requires buyers to be more aggressive in the country as they need more animals. There is growing concern over supply as the year progresses.	4)	Packers may have purchased sufficient supply for the week, leaving them without the need to be aggressive and possibly reducing cash bids.

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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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