DTN Early Word Livestock Comments

Cattle: Steady. Futures: Mixed. Live Equiv: $194.33 +$0.49*

Hogs: Steady. Futures: Mixed. Lean Equiv: $109.12 -$3.34**

*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:

Live cattle were in a tug-of-war Monday between higher grain prices and the prospect of higher cash. Futures traded on both sides of unchanged and eventually closed mixed. Showlists were distributed Monday with no cash business taking place with none expected to develop. Feedlots will want more to compensate for higher feed prices and want more of the packers share of profits. Boxed beef was higher again Monday with choice up $0.34 and select up $1.85. The recent strength of boxed beef potentially indicates boxed beef has found a bottom. Cattle ranchers and feedlots in Nebraska plan to build a $325 million processing plant to compete with current meatpacking companies who have been blamed for low cattle prices. The new company, Sustainable Beef LLC, is a step to provide competition for the four largest packing companies that process around 85% of the nation's beef. The Commitment of Traders report showed funds as net buyers of 1.593 futures contracts bringing their total of net long positions to 40,144.

Hogs found strong buying interest from traders Monday, which seems mainly tied to technical buying. Cash did not support the move with the National Direct Afternoon Hog report down $1.61. Cutouts did not support the move with price plummeting $3.34. The April contract was higher but limited compared to other contracts. It is holding near cash as it moves closer to expiration about three weeks. Later contracts eliminated the losses of the previous two days bringing futures back on track to make new highs. However, the fact that packers were not as aggressive early this week does provide concern over continued price strength. The Commitment of Traders report showed funds were net sellers of 2,674 futures contracts bringing their net long positions to 63,335 contracts.

	BULL SIDE		BEAR SIDE
1)	Feedlots will hold for higher cash this week due to steady to higher prices obtained last week.	1)	Cattle futures were unable to follow through on the strength of Friday, leaving he market vulnerable if cash cattle are no better than steady this week.
2)	Boxed beef prices seem to have found a bottom for the time being, which could result in packers being more willing to pay more for cattle this week.	2)	Corn prices seem to be turning back up again after consolidating for a period. This will put pressure on feedlots.
3)	Hog futures regaining the losses of the previous two days leaving the market poised to make new highs. Market potential defied the weakness of cash and cutouts Monday.	3)	Packers were able to obtain hogs at lower prices Monday, possibly indicating there are more market ready supplies available this week.
4)	Supplies are expected to continue to tighten as the year progresses keeping support under the market.	4)	It may be difficult for futures to retain the gains of Monday due to the weakness of cutouts. Further weakness of cutouts could eliminate gains quickly.

**

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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