DTN Early Word Livestock Comments

Cattle: Higher. Futures: Mixed. Live Equiv: $202.64 -$0.83*

Hogs: Steady. Futures: Mixed. Lean Equiv: $116.04 +$1.73**

*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:

Packers became more aggressive Wednesday, paying $2.00 to $4.00 more for dressed cattle than last week. Live cattle price remained much as it had been this week at $1.00 higher. The slaughter pace has been brisk, and packers needed cattle to keep plants operating efficiently and demand satisfied. At this pace, any backup of cattle might be cleaned up keeping feedlots current providing some bargaining power for higher prices. However, corn prices continue to increase with new highs again Wednesday and new highs again overnight. Boxed beef prices declined Wednesday with choice down $1.11 and select down $1.34. Weekly export sales Thursday are not expected to show much that would impact the market significantly. Thursday is the last trading day of the week.

Hogs could not muster enough buying interest to move futures into positive territory. The only gain took place in April as it winds down with Thursday being the final day for the contract. May will take over as front month carrying about a $12.00 premium to the index. That is a lot of optimism for the next month. The market might have been overdone to the upside on Tuesday resulting in a price correction. Cash did not follow through for a second day with the National Direct Afternoon report down $1.88. Fortunately, cutouts gained $1.73 indicating good demand. Weekly export sales are not expected to be a market-mover and today is the last trading day for the week. Futures may show two-sided trading.

	BULL SIDE		BEAR SIDE
1)	The strong increase of cash was a welcomed surprise after three weeks of steady prices. Demand remains strong and packers need cattle.	1)	Continued increasing feed prices may limit the desire of feedlots to hold out for higher prices next week. Market-ready cattle will need to be moved.
2)	Cattle futures rallying in the face of stronger corn prices is a good sign. This will provide feedlots with the desire to ask for more next week with the likelihood of getting it to keep pace with rising feed costs.	2)	If weekly exports sales are disappointing, it could result in pressure on futures moving into the three-day weekend.
3)	The rebound of hog futures might be more calculated rather than exuberant as demand increases after Easter. There is strong optimism for higher cash.	3)	The inability of hog futures to follow through Wednesday may leave the market somewhat uneventful today. Trading may be two-sided before the extended weekend.
4)	Stronger cutout values may indicate increasing demand moving forward, requiring packers to step back up more aggressively to obtain the hogs needed to meet demand.	4)	The large premium in the May contract could erode if cash does not begin to trend higher soon.

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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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