DTN Early Word Livestock Comments

Cattle: Lower. Futures: Mixed. Live Equiv: $193.58 -$0.51*

Hogs: Lower. Futures: Higher. Lean Equiv: $115.87 +$-.23**

*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:

Some of the selling pressure was relieved from the cattle complex due to lower corn futures. This had a strong impact on feeder cattle as they posted triple-digit gains. Live cattle were mixed with strength in later months due to lower corn futures and the potential for tightening supply. Nearby months reacted to lower cash trade. Cash activity was somewhat light but unfortunately $2.00 lower than last week. This has likely set the stage for the rest of the week with cash activity increasing Thursday. The weakness in boxed beef was bound to impact what packers were going to pay for cattle. Boxed beef Wednesday showed choice down $0.96 and select down $0.18. Weekly export sales Thursday morning will provide traders with something else to think about.

Hogs were a mixed bag Wednesday with April and May, closing slightly higher while later months declined. Futures may have a difficult time regaining recent losses in the near term. However, fundamentals have not changed with supplies tightening and packers bidding aggressively to get what they need to supply chain speed. The Nation Direct Afternoon showed cash up for the third consecutive day with a gain of $3.72. Further support came from cutouts gaining $0.23. Traders want to buy into this market and increase long positions but need more confidence in the near term to be more aggressive. That may come if weekly export sales are strong Thursday morning. Projected Saturday slaughter was unavailable.

	BULL SIDE		BEAR SIDE
1)	Lower cash cattle have already been factored into the market, which might allow for futures to stabilize.	1)	Cash cattle trading $2.00 lower does not bode well for a rebound of futures anytime soon.
2)	Cattle are oversold technically which could result in short covering into the weekend.	2)	Live cattle futures have posted lower highs for six consecutive trading sessions with contracts nearing support from Jan. 24. A close below support would be negative.
3)	Strong cash for hogs indicates continued strong demand and/or tightening market-ready supplies.	3)	Hog futures tried to regain some loss Wednesday but could not quite pull it off even though cash and cutouts were higher. The market may just be tired for the time being with traders waiting for something more to trigger buying.
4)	Weekly export sales are expected to be strong which would provide some support to futures in light of the recent decline.	4)	Cash may be lower Thursday after three days of higher cash. Packers may have purchased what they need for the rest of the week.

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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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