DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $190.88 -$0.12*

Hogs: Steady Futures: higher Lean Equiv: $106.94 -$0.70**

*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 seem to be no further expectations for any change in cash cattle prices this week. This gave little reason for traders to press the downside any further. The gains in futures Wednesday may be about as good as it gets for now until there is further direction from cash. Boxed beef was slightly lower with choice down $0.16 and select down $0.17. Live cattle bounced from technical support Wednesday overcoming strong corn prices, but traders may wait to see the numbers on the World Agricultural Supply and Demand (WASDE) report before they establish longer-term positions. Weekly exports sales will be the first report to look at Thursday, but it may not provide much direction by itself. The WASDE report will have greater impact on feeder cattle based on USDA's grain numbers.

Hog futures again moved up and down during the day. The May contract showed limited movement as it winds down to expiration Friday. June established lower lows but was able to close near the highs. Later contracts were not as fortunate. The path of least resistance has been lower. Technical traders are intent on fulfilling the objective of about $97.00 for the head and shoulders top in the June contract. Price did bounce from support Wednesday after reaching the lowest price since Jan. 18. Cash did not repeat the strength of earlier this week with a decline of $0.81. Cutouts continued lower, showing a loss of $0.70. Weekly export sales need to pick up the pace to inject some positive demand news into the market. Saturday slaughter is projected at 50,000 head.

	BULL SIDE		BEAR SIDE
1)	June live cattle hold a discount to cash, which should provide limited downside for the time being.	1)	Steady cash and higher corn prices may keep cattle from finding solid support for the time being.
2)	Large price gaps remain in the cattle complex above the market in all contracts. These should be filled over time.	2)	Packers continue to purchase cattle for deferred slaughter, which reduces their aggressiveness in the cash market.
3)	The intra-day volatility of hog futures over the past two days is often an indication prices may be establishing a bottom. Futures are oversold and ready for a correction.	3)	Weekly pork export sales need to show good international interest or supplies could continue to back up in the market.
4)	The overall supply of hogs is extremely tight. Any indication of improving demand will send prices higher.	4)	Packers likely accomplished their two days of aggressive buying, purchasing quite a few hogs already this week. Supplies continue to be readily available.

**

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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