DTN Early Word Livestock Comments

Cattle: Steady. Futures: Mixed. Live Equiv: $194.97 +$0.64*

Hogs: Higher. Futures: Higher. Lean Equiv: $114.22 +$5.10**

*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 struggled as the majority of traders seem to think cash will not be any better than steady this week. Both packers and feedlots have so far just looked at each other hoping something will tip in their favor. Packers looked at the mixed boxed beef prices yesterday and may be less apt to pay higher as the recent price increases might be over. Yesterday, choice gained $1.47 with select down $0.67. Feedlots may be willing to hold out hoping for a repeat of last week as packers are pushed into a corner and need to purchase. Some business should surface Wednesday, but if packers and feedlots hold yet again, Thursday would get interesting.

Hog futures anticipated cash and cutout strength a day early. Analysts were scratching their head Monday wondering why hog futures were sharply higher when cash and cutouts were lower. Yesterday's price certainly supported the rally. The National Direct Afternoon report should cash up $5.59. Cutouts finished out the day with a gain of $5.10. Packers seem to have limited ability to pay less for hogs for any length of time. Competition of market ready supply is strong. This is not likely to change anytime soon as the supply of hogs is not abundant. USDA will release the February Cold Storage report Wednesday showing whether inventory is increasing or holding.

	BULL SIDE		BEAR SIDE
1)	Cash cattle have not yet traded, which could lean in the favor of feedlots if packers need cattle and are not willing to wait it out.	1)	Cattle futures anticipate no better than steady cash this week. High feed prices may influence the resolve of feedlots whether to hold or fold.
2)	Current corn futures continue to consolidate in a range, which may provide some confidence to feedlots to hold out if they need to for another week in order to garner higher cash.	2)	If boxed beef prices weaken again, there will be little hope packers will pay up. This would make it more difficult for feedlots to have bargaining power.
3)	The sharp increase of both cash hogs and pork cutouts Tuesday indicates packers need supply and consumers are buying.	3)	Later hog futures are nearing price resistance. This may stall the rally again as technical traders might sell into the market.
4)	Hog futures are knocking on the door again for the potential to make new highs. Continued cash strength and a friendly cold storage report might provide the catalyst to accomplish it.	4)	If pork in cold storage is increasing more than anticipated, price potential may be limited as we move through spring.

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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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