DTN Early Word Livestock Comments

Cattle: Steady. Futures: Mixed. Live Equiv: $202.68 +$0.21*

Hogs: Steady. Futures: Mixed. Lean Equiv: $110.52 -$1.26**

*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 livestock complex showed the evidence of spread trading Thursday. Traders shied away from buying in nearby months, preferring to buy more aggressively in later months. Without any further change in cash this week, traders were not sure what to do. Boxed beef prices did not help as choice was down $0.04 with select up $0.17. Weekly export sales were a bit disappointing at 14,000 mt. This was down 39% from the previous week. China was not listed as one of the top buyers. Traders may remain cautious Friday morning as they ponder the release of the World Agricultural Supply and Demand report and what that might mean for feed prices.

Hog futures were at least able to hold support Thursday. Nearby months struggled while traders favored purchasing the back months. Both optimism and tightening supplies as the year progresses has kept later contracts in an uptrend despite the recent pressure. The same has not been true in closer months as futures seem to have corrected from being overpriced. Cash has not been supportive all week and the decline of $0.72 on the National Direct Afternoon Hog report Thursday leaves little optimism for higher cash to end the week. Cutouts fell $1.26 adding pressure to the recently struggling market. Weekly export sales were strong at 41,200 mt with China being in the list of top buyers. Sales were up 49% from the previous week. Saturday slaughter in projected at 89,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may be low enough to garner the interest of traders to step back into the market due to contracts holding support on Wednesday. A price retracement is in order.	1)	Anything other than a bearish World Agricultural Supply and Demand report Friday may be bearish to the cattle market as further increasing feed prices will push feedlots to move cattle.
2)	Cash has been steady the past two weeks, yet June futures have fallen $4.00. It is holding a discount to cash rather than the normal premium of over $8.00 it generally carries at this time of year.	2)	Disappointing export sales provides little support for prices in light of anticipated increasing cattle supplies moving ahead into late spring and summer months.
3)	The hog market has corrected the overbought technical situation with the steep decline likely overdone. Fundamentals have not changed with hog supplies expected to tighten as the year progresses.	3)	Hog futures have taken a beating leaving traders cautious over buying back into the market in light of recent cash weakness.
4)	The technical bearishness of the key reversal and the island top in the June contract should have run its course with futures potentially backfilling the price gaps remaining from the beginning of the week.	4)	Increased hog weights suggest hogs could be backed up in the country and may be the reason packers have been paying less knowing that these hogs will need to come to the market.

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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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