DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $184.16 +$3.22*

Hogs: Lower Futures: Mixed Lean Equiv: $92.37 -$5.37**

*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:

Traders just could not get excited about the prospect of cattle prices this week after some limited cash trading took place $2.00 lower. It will be interesting to see how packers will approach the market Thursday. They will need to purchase cattle to procure the desired numbers for the week. However, they may begin to slow chain speed as has been anticipated. Boxed beef prices jumped with choice up $6.31 and select up $0.63. The jump of choice cuts, although impressive, only reversed the loss that took place on Monday with select showing continued weakness. Traders will be cautious over getting too carried away only on boxed beef prices Wednesday and will wait for cash to provide further direction. Weekly export sales may provide some direction but may not be the focus.

Hogs showed some follow-through but were able to close higher in most contracts. February struggled and could not close higher due to premium to cash. It was a good close considering the weakness of cutouts, which fell $5.37. Generally, this would have put significant pressure on the market but was offset somewhat by cash being up $2.26 on the National Direct Afternoon Hog report. The problem is that two days of higher cash has been the pattern and generally expected, leaving cutouts as the main driver of the market. Weekly export sales will need to be strong, or this market could see further weakness.

	BULL SIDE		BEAR SIDE
1)	Traders may buy futures as a reaction to higher boxed beef. Often the price movement of boxed beef is traded the following day.	1)	The few cattle that traded Thursday traded $2.00 lower than last week. Many times, this sets the stage for the rest of the week.
2)	Liquidation may have run its course for now. Cash cattle trading steady Thursday would likely support the market.	2)	Packers may be slowing slaughter in preparation for the possibility of slowing demand. Lighter cattle supplies will not mean much if demand weakens.
3)	Hog futures were able to reject the lows and close generally higher. Futures may be overdone to the downside.	3)	The large decline of cutouts Wednesday may negatively influence the trade today.
4)	Continued strong slaughter pace indicates demand is good. This will keep marketings current. Average hog weights are running 5.4 pounds below a year ago.	4)	Average hog weights increased 1.3 pounds last week, putting more pork on the market with higher slaughter numbers.

**

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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