DTN Early Word Livestock Comments

Cattle: Steady. Futures: Mixed. Live Equiv: $196.33 +$0.26*

Hogs: Steady. Futures: Mixed. Lean Equiv: $115.52 +$1.62**

*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 did not have much to go on Thursday other than some positioning ahead of the Cattle of Feed report released after the close today. Estimates for the report are 101.1% on feed, placements of 106.3%, and marketings at 104.3%. Higher placements could be bearish as the year progresses, but higher placements now could mean lower placements and tighter supply later in the year. Traders will mainly focus on positioning ahead of the report Friday. Any cash business Friday will be done at steady money as it has been so far this week. Boxed beef prices were mixed with choice up $0.81 and select down $0.65. Weekly export sales were good at 27,500 mt, 40% higher than last week and a marketing-year high.

Hog futures tried to match and make new contract highs during the day but could not uncovered sufficient buyer interest to accomplish the task. Unfortunately, the lows of the day failed to close chart gaps remaining under the market leaving futures vulnerable for technical traders. Cash was weaker with the National Direct Afternoon report showing a decline of $0.57. It is possible packers may be a bit more aggressive to close out the week, depending on the number of hogs purchased so far. However, the cash action so far would suggest any gains might be minimal. Cutouts posted a nice gain of $1.62. Weekly export sales of 23,300 mt were not supportive with a decrease of 39% from the previous week.

	BULL SIDE		BEAR SIDE
1)	Cattle futures could be establishing a solid base with continued sideways price movement. Steady cash should keep it supported.	1)	The Cattle on Feed report may keep a lid on price potential Friday. Any area of the report could be a little more bearish than expected. If so, futures could break lower again.
2)	Short covering ahead of the Cattle on Feed report could allow futures to retest the recent highs.	2)	April cattle generally carry a premium to cash at this time of year. However, they have been trading at a discount for a while.
3)	Hog futures were lower but held well despite lower cash and disappointing exports. New highs are likely as supplies continue to tighten.	3)	Hogs have chart gaps below the market that may be filled. The market tried but could not accomplish the task Thursday.
4)	Packers may need to purchase more aggressively Friday if they did not obtain enough for the week. They may need to bid higher fill orders.	4)	Packers may not need any more hogs this week, which could mean lower cash again Friday and further pressure on futures.

**

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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