DTN Early Word Livestock Comments

Cattle: Lower. Futures: Higher. Live Equiv: $192.62 +$0.57*

Hogs: Steady. Futures: Mixed. Lean Equiv: $114.15 +$2.66**

*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 just could not help themselves as the oversold market needed a bounce. Traders decided it was time to cover their short positions after futures declined around $10.00 over the past month. This decline took place even though cattle supplies are expected to tighten. Escalating feed prices had an influence on the market as well as the indication from boxed beef that consumers were backing away from higher end cuts of beef. It is likely cash will not trade higher this week based on the trend set last week and significantly lower boxed beef prices over the past month. Boxed beef did bounce Monday with choice up $0.38 and select up $1.81 but traders will be cautious whether boxed beef has found a bottom. The Commitment of Traders report showed funds as net sellers of 25,281 contracts in live cattle reducing their net longs to 60,152 contracts.

Hog futures still seem to be in trouble with continued liquidation after Friday's limit down move. The market tried to rebound from the large decline but could not hold the gains during the day. The strength of cash on the National Direct Afternoon report was a bit of a surprise with a gain of $2.95 to begin the week. Cutouts increased $2.66. Both higher cash and higher cutouts should set the stage for higher futures. The underlying potential for hog supplies to continue to tighten as the year progresses has not changed, but there is influence on price movement from outside markets. The Commitment of Traders report showed funds and net sellers of 2,455 futures contracts bring their net long positions to 74,506 contracts.

	BULL SIDE		BEAR SIDE
1)	It is uncertain whether the bounce of cattle futures indicates the market has bottomed, but it does provide some confidence for traders to buy back into the market for the long term. The market may be overdone to the downside.	1)	The bounce Monday was overdue as the market needed to make a price correction for the oversold condition, However, that may be about it if cash and boxed beef are not supportive.
2)	Beef prices may be low enough to stimulate consumer buying, which should stabilize price and keep packers looking for cattle more aggressively.	2)	High feed prices are likely to remain for a while, which will keep feedlots wanting to move cattle as soon as they are ready rather than hold for higher prices.
3)	Hog futures need to fill that chart gap on the upside that remained from the bearish trade on Friday. Gaps are generally filled.	3)	The price action of hog futures Monday did not indicate much hope for a rebound of prices anytime soon. Stability may be the best we can hope for in the near term.
4)	Strong cash Monday indicates packers need hogs and continue to bid up to get them.	4)	There remains a chart gap about $9.00 lower in the April contract that is of concern to technical traders.

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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.

Join DTN Lead Analyst, Todd Hultman, at 12:30 p.m. CST on Wednesday, March 9, as we take a look at USDA's new estimates and what they mean for the market. We'll also look at the market's own clues to help understand what is driving today's prices. Register for the webinar here: https://ag.dtn.com/…

Robin Schmahl can be reached at rschmahl@agdairy.com

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