DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $198.15 +$0.13*

Hogs: Steady Futures: Mixed Lean Equiv: $89.31 +2.55**

*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 COMMNETS:

The livestock complex pushed higher Thursday with live cattle making new contract highs and factoring in higher cash this week. Feedlots posted offers $2.00 to $4.00 higher with no activity yet taking place. Packers need cattle but how aggressive will they be? They cannot wait for more ample supply as there is none and may not be any for some time. Boxed beef held in positive territory with choice up $0.03 and select up $0.88. Good export sales provided support with a weekly sale of 25,200 metric tons (mt). China was the third largest buyer. Feeder cattle were not left out of the party with triple-digit gains exceeding the strength of live cattle. Corn prices were lower, which also provided some support.

Hogs showed strong gains after bouncing off support Wednesday. There is really not much fundamental support under this market currently, but technical buying could carry this market further. Midday cash showed some promise, but that fizzled with the National Direct Afternoon Hog report showing cash down $0.10 on the day. The positive aspect of the day was a gain in cutout values of $2.55. That should provide further support Friday as traders will react to the cutout strength. Weekly export sales were good at 30,900 mt with Mexico taking most of it. Saturday slaughter is estimated at 160,000 head.

	BULL SIDE		BEAR SIDE
1)	Packers will need cattle and feedlots are holding out. Higher futures and tighter numbers should generate higher cash.	1)	A $2.00 to $4.00 cash gain is expected by feedlots. Anything less than that will be a disappointment and would trigger selling.
2)	New contract highs may bring more buying interest into the market. The trend is your friend, and the trend is higher.	2)	Boxed beef is in an overall downtrend. Consumers seem to be slowing the purchase of higher-priced cuts.
3)	Hog futures bounced off support Wednesday, extending the gains Thursday. Higher cutouts should support the market Friday.	3)	Hog market fundamentals do not suggest an extended price rally. Cutouts have yet to find solid support.
4)	The market is correcting the oversold condition. More short-covering could propel hog futures a couple of dollars higher.	4)	Packers have little difficulty finding sufficient hog to keep a strong slaughter pace.

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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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