DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $198.15 +$1.06*

Hogs: Higher Futures: Mixed Lean Equiv: $135.94 -$1.85**

*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:

Cattle opened substantially lower Monday in reaction to the bearish placement number on the Cattle on Feed report. However, after the initial knee-jerk reaction was finished, futures came roaring back as the friendly cattle inventory report seemed to take the stage, becoming the focus of traders. Futures contracts through April closed higher despite higher corn futures and the potential for steady to lower cash again this week. No cash business was done Monday with packers less likely to be aggressive due to an amount of cattle already booked for the week. Boxed beef prices were higher with choice up $0.99 and select up $2.250. Feeder cattle were under pressure from higher corn futures and eliminated much of the gain on Friday. Feeders will likely be under pressure again Tuesday due to strong corn futures overnight.

Hogs clearly showed the unwinding of spreads that were established last week. August and October suffered triple-digit losses, putting August right in line with cash. The National Direct Afternoon Hog report showed cash down $1.29. This was offset to some extent by cutouts increasing $1.85. If the pattern of packer buying holds, they should be more aggressive Tuesday as they look to procure the hogs they need. Cash has generally been strong on Tuesdays and with cutouts indicating good demand over the weekend, this pattern could be seen today.

	BULL SIDE		BEAR SIDE
1)	Live cattle might see further support as traders have digested the Cattle on Feed report and seem focused on the potential for tighter supplies over time.	1)	Rising corn prices will put pressure on the cattle complex.
2)	Feeder cattle buyers remain aggressive at auctions, indicating supplies of calves and feeder cattle are tighter and feedlots want them.	2)	There is anticipation of steady to lower cash again this week as packers may not need to be aggressive due to their ability to continue to purchase some cattle for differed delivery.
3)	Packers are expected to bid more aggressively for hogs today as that has been the pattern.	3)	Spread unwinding in hog futures could continue Tuesday, resulting in further pressure on nearby contracts.
4)	Pork cutouts continue to exhibit strength. This indicates continued strong demand.	4)	Hog slaughter continues to run at a slower pace than a year ago, which leaves sufficient hogs available to the market and packers less aggressive.

**

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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