DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $187.09 -$0.98*

Hogs: Steady Futures: Mixed Lean Equiv: $114.44 +0.82**

*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:

For the week, live cattle futures did not change much even with the volatility during the week. Feeder cattle showed significant losses, even though corn futures weakened much of the week. Cash trading steady to $1.00 did not have much impact as it had already been factored in, leaving little for traders to get excited about. It will be an interesting week as boxed beef has not been performing well. On Friday, choice cuts increased $0.06 while select fell $3.30. Traders will also be looking ahead to the Cattle on Feed report to be released Friday. Even though it seems packers have been holding back and there is anticipation they will need to step up their purchases, they may have strategically placed themselves in a position in which they can afford to hold back this week and wait for the movement of corn price as well as the results of the Cattle on Feed report. The Commitment of Traders report showed funds as net buyers of 7,523 contracts, bringing their net-long positions to 67,966.

Hogs had a good week with nice overall gains. It has been impressive considering both the strength and weakness of cash during the week. Traders finally were able to see the export business that had been done over the past month. This aided in the strength seen during the week as international demand remained strong. Cutouts gained Friday with an increase of $0.54. However, this was offset by a $4.25 decline on the National Direct Afternoon Hog report. The Commitment of Traders report showed funds as net buyers of 5,992 futures, bringing their net-long positions to 50,199 contracts.

	BULL SIDE		BEAR SIDE
1)	The potential for packers to be short bought could result in more aggressive buying this week.	1)	Cattle futures did not change much last week, even though cash was steady to higher. The upcoming Cattle on Feed report may leave the market sideways this week.
2)	Feedlots held out last week and were able to score steady to higher cash. This may provide the confidence to do the same again this week, forcing packers to pay up.	2)	Cattle futures have been unable to penetrate chart resistance or contract highs so far. This may be a formidable technical ceiling.
3)	The strength of hog futures last week was impressive, extending the uptrend. Follow-through gains may unfold this week.	3)	Hog futures may run out of steam if packer margins do not continue to improve, and they are unwilling to pay up for hogs.
4)	Strong export demand should support the market as pork may not back up into the domestic market, keeping packers buying for an increased slaughter pace.	4)	Hog numbers remain sufficient to keep the current slaughter pace. Packers are able to obtain the hogs needed without difficulty.

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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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