DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv $199.61 -$1.30*

Hogs: Higher Futures: Higher Lean Equiv: $118.70 +1.08**

* 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:

Live cattle prices dipped Friday as traders positioned themselves ahead of USDA's Cattle on Feed report. The numbers on the report suggest further liquidation may likely unfold Monday. The only category on the report that was near expectations was marketings at 98% compared to the estimate of 98.2%. The other categories were bearish. On feed numbers were 102% compared the estimate of 100.4%. This is the highest number of cattle on feed since the series began in 1996. However, placements during the month really took the cake at 100% versus the average trade estimate of 92.2%. That is the most bearish number on the report, which has generated questions of the accuracy of the report. However, one could question the accuracy of the estimates as well. There are always two sides to every coin. In any case, traders have these numbers to trade today. Total beef inventory in March increased 11% according to the Cold Storage report. Boxed beef on Friday closed lower. Choice was down $2.26 with select down $0.96. Lower corn futures last week should provide some support for feeder cattle futures, but that will depend on the direction of live cattle futures.

Liquidation in the hog complex that gripped the market for three days, finally ran its course Friday with triple-digit rebounds in contracts through August. Cash fell apart Friday with the National Direct Afternoon report reporting a decline of $6.91. Some support stemmed from the increase of $1.08 in pork cutouts. For futures to trend higher, cutouts will need to consistently post gains. Total pork in cold storage for the month of March was up 8% compared to the previous year with belly supply up 60% from a year ago. Packers are expected to be more aggressive to begin the week.

	BULL SIDE		BEAR SIDE
1)	Many times, the cattle market will trade the opposite direction of what the Cattle on Feed report would indicate. Questions surrounding the accuracy of placements in March may leave the market mixed or possibly higher.	1)	The high placements during March were a complete surprise and might put significant pressure on futures.
2)	Feedlots hope for higher cash again and may hold out as they see a strong slaughter pace and lower corn prices.	2)	Higher on feed numbers will assure sufficient cattle supplies for demand over the next months.
3)	Now that the recent liquidation phase seems to have run its course, traders might buy back into the market.	3)	Traders need to see more evidence of consistent demand through further strength of cutouts before there might be a change of trend.
4)	The supply of hogs remains tight, which would cause packers to step up to the plate early this week to obtain the hogs they need to process.	4)	May hog futures continue to hold a substantial premium to cash. This may keep pressure on the market as cash and futures will converge in in three weeks.

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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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