DTN Early Word Livestock Comments

Cattle: Steady. Futures: Mixed. Live Equiv: $193.37 +$0.76*

Hogs: Higher. Futures: Higher. Lean Equiv: $112.05 +$1.29**

*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 are finding some support from the consolidating corn market. Without feedlots having to consistently see corn prices increase, they may have the desire to hold out for steady to higher cash this week. Asking price in the South surfaced at $142, which is rather optimistic based on trade last week. The hope is for cash to regain some of what was lost. There was no indication as to what packers are willing to pay this week. Boxed beef showed another positive day Tuesday with choice up $2.39 and select up $1.10.

Hog futures showed a dividing line with April through August higher while later contracts were lower. Packers were aggressive yesterday with the National Direct Afternoon Hog report showing a gain of $4.67. Cutouts were also higher posting a gain of $1.29. With the strength of cash and cutouts, one would have thought futures would have shown more strength. Traders are somewhat cautious as June through August are near to retesting the highs. Even though demand is holding well, and hog supplies are expected to tighten as the year progresses, current futures might have much of this already factored in.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have been able to rebound due to corn futures consolidating, which may be building solid price support under the market.	1)	Feedlots may be a bit too optimistic with offers. Packers have some purchased ahead already and may pay no more than steady with last week.
2)	Feedlots are optimistic they may be able to receive high prices this week as boxed beef prices have shown recent strength.	2)	Corn futures are consolidating but are still high, resulting in high feed prices. Feedlots do not want to hold cattle any longer than necessary, which may limit upside potential.
3)	October hog futures set a new contract high Tuesday, indicating the bullishness evident in the market over tighter supplies as the year progresses.	3)	Once packers have sufficient hog purchased for the week, cash prices will decline putting pressure on futures.
4)	Very strong cash Tuesday bodes well for the hog market Wednesday. Packers continue to pattern of buying aggressively early in the week and only reduce bids once they have sufficient supply.	4)	Even though some plants will be increasing chain speed later this month, it does not mean they will process more hogs as the lack of a full workforce is ongoing.

**

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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