DTN Early Word Livestock Comments

Cattle: Steady. Futures: Mixed. Live Equiv: $203.10 +$1.97*

Hogs: Steady. Futures: Mixed. Lean Equiv: $111.01 -$2.75**

*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:

There was hope steady cash trade already taking place on Monday did not set the precedence for the week. However, those hopes were dashed with further trade developing at steady cash Tuesday. Feedlots have a lot of work cut out for them to obtain higher prices, but with increasing feed prices, there may be little desire to hold out. Boxed beef prices increased with choice up $3.49 and select up $1.20, indicating demand remains strong. The recently established long futures positions by the funds seem to be in liquidation with futures falling the past five days. Overnight corn futures were lower which could provide some relief to the selling pressure.

Hog futures seemed to be holding after the recent sell off until the end of the trading day neared. Futures fell more than $3.00 over a three-minute period, thankfully recovering about $2.00 of that loss over the final 12 minutes of trading. The only explanation seems to be that traders finally threw in the towel after futures were unable to rally throughout the day. No support was seen from either cash or cutouts. The National Direct Afternoon Hog report showed a decline of $1.38. Cutouts fell $2.75 exactly eliminating the gain on Monday. Packers have been able to purchase hogs at lower prices so far which may leave them less aggressive Wednesday.

	BULL SIDE		BEAR SIDE
1)	Corn futures are lower overnight, which may allow cattle futures to rebound somewhat along with liquidation running its course.	1)	Increasing feed prices are having an impact on the willingness of feedlots to hold out for higher cash. They want to move cattle to market as quickly as possible.
2)	Steady cash and higher cutouts should provide sufficient support to futures keeping them from falling further.	2)	More cattle are expected to be available as the calendar moves closer to May leaving packers less aggressive as they know they will have little difficulty obtain the supply they need.
3)	Hog supplies continue to tighten, which should result in packers becoming more aggressive once current supply is cleaned up.	3)	Technical traders continue to view the island top in hog futures as bearish for the time being, regardless of tighter supplies.
4)	Futures falling within the final 15 minutes of trading and then rebounding from the lows may trigger more aggressive buying Wednesday.	4)	Packers have been able to purchase hogs without difficulty this week leaving them less aggressive with their bids.

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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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