DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $193.84 +$0.54*

Hogs: Steady Futures: Higher Lean Equiv: $112.46 -$0.31**

*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:

The ability of cash cattle to trade steady to higher was a victory, allowing futures to close higher for the week. April gained nearly $3.00 since the previous week. June gained over $4.00, reaching the highest level since Feb. 28. There is potential for limited upside due to higher energy and food prices and how that could impact overall demand. Beef exports last week were down substantially from the previous week and may be an indication of weakness to come. However, the bright side of this is that cumulative exports so far this year have reached 419,400 metric tons (mt). This is 15,800 mt more than a year ago and the highest on record for this time of year. Boxed beef prices were mixed Friday with choice up $1.11 and select down $0.03. Feeder cattle closed the chart gaps left from the previous day, keeping futures somewhat in a sideways trading range for the week.

Hog futures retraced quickly from the double-top established on Wednesday last week. Strong cash during the first half of the week waned with technical trading taking over. The National Direct Afternoon Hog report on Friday showed cash down $3.12. Slaughter continues to run lower than the previous week and the previous year with packers trying to match product with demand while at the same time having to search for hogs to fill current demand. The uncertainty of demand due to higher food and energy prices is also a concern that may limit upside potential for the time being. If the pattern of the past few weeks holds, cash should be higher Monday as packers look for hogs.

	BULL SIDE		BEAR SIDE
1)	Feedlots were able to hold out for steady to higher cash last week. this should provide the confidence to do the same this week.	1)	Higher grain futures overnight might put pressure on futures as short-term traders trade the correlation to attempt to make a profit.
2)	Boxed beef prices may have established a bottom for the time being, indicating a potential minimum level of demand. This should support the market.	2)	There is concern there may be a shift lower in consumer demand due to increasing food and energy prices.
3)	Hog futures fell back from the highs but may be establishing a trading range that will allow futures to retest the highs again.	3)	Lower cash hogs and cutouts on Friday may keep the market on the defensive for yet another day.
4)	Packers should begin the week aggressively looking for hogs and paying higher prices to obtain them.	4)	With near-term demand uncertainty, hog futures may have limited upside potential and may hold in a sideways trading pattern.

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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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