DTN Early Word Livestock Comments

Cattle: Higher Futures: Higher Live Equiv: $213.85 +$2.21*

Hogs: Higher Futures: Higher Lean Equiv: $84.12 -$1.47**

*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:

The large increase in cash cattle last week leaves traders a bit skeptical whether higher cash can again be achieved this week. However, with strong boxed beef prices so far this week, feedlots will hold out for higher prices. Packers may be willing to spend more as their profit margins are being maintained after the large cash increase last week. Boxed beef prices were strong with choice up $2.85 and select up $3.77. Tightening cattle supplies should keep the market supported, unless demand begins to falter. Feeder cattle showed a similar pattern as live cattle futures. Feeders closed under pressure despite the weakness of corn. Feeder cattle were higher earlier Tuesday but succumbed to some spillover pressure from live cattle.

Hogs initially reacted to higher cash and cutouts Tuesday. However, that was short-lived with selling pressure taking over. As pressure mounted and futures declined, stops were triggered, and the market pancaked lower. The April contract took the biggest hit setting another new contract low as it is converging to cash. The National Daily Direct Afternoon Hog report showed cash down $0.28. Cutouts declined $1.47, eliminating Tuesday's gains and then some. Packers are expected to pay more for hogs Wednesday, but increased cash prices might be minimal as there are plentiful market ready hogs available.

	BULL SIDE		BEAR SIDE
1)	Feedlots will hold for higher cash. Supplies of cattle are not getting any larger and demand remains strong. Packers will need to meet demand.	1)	Traders seem to be reluctant to anticipate what cash will do, but rather remain cautious until business takes place. Some profits were taken due to the lofty level of cattle futures.
2)	Boxed beef prices have shown strong gains so far this week. This indicates demand continues to remain solid.	2)	Feeder cattle could not hold strong gains, even though corn futures moved lower. Traders are cautious over how much higher cattle futures can go.
3)	Hog futures remain oversold and in need of a price correction.	3)	Traders are looking at any price increases in hog futures as a selling opportunity. Funds hold record short positions and are comfortable holding those positions.
4)	Hog slaughter continues to remain strong, keeping supply from backing up. Eventually market-ready hog numbers may decrease, providing some support with higher cash.	4)	Pork demand leaves much to be desired with the current slaughter pace more than adequate to supply the market.

**

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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