DTN Early Word Livestock Comments

Cattle: Higher Futures: Mixed Live Equiv: $214.89 +$0.48*

Hogs: Steady Futures: Mixed Lean Equiv: $85.17 -$0.78**

*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 had been cautious, waiting to see what cash cattle trade was going to show before becoming more aggressive. The substantial increase of cash on Wednesday was the catalyst for traders to buy into the market right from the opening. All contracts for both live and feeder cattle gapped higher and never looked back. New contract highs were posted across the board in live cattle and in August and later feeder cattle contracts. Demand for beef is strong with slaughter weights running lower than the previous week and significantly lower than the previous year. Cattle are being pulled ahead to obtain the required tonnage of beef. Boxed beef was mixed Friday with choice up $1.33 and select down $0.85. There could be some initial follow-through Monday, but it may settle down somewhat as traders will again wait for direction from cash. The Commitment of Traders report showed funds adding 23,744 long futures positions as of April 4, bringing their net-long positions to 83,230 futures. Feeder cattle increased by 541 futures contracts, bringing their net-long positions to 6,519.

Hogs did not follow the same pattern as cattle with futures closing mixed. The June contract again made a new low but fortunately did not remain there. April gained $0.75, closing at $74.15 as the contract converges with cash and goes off the board on April 17. Cutouts were stronger Thursday with a gain of $2.12 but settled down $0.78. That still does not provide solid support to the market. Hog weights last week declined 0.6 pounds to an average weight of 287.1 pounds. The National Direct Afternoon hog report Friday showed cash down $0.25. There will be a few processing facilities that will be dark Monday, limiting slaughter. The Commitment of Traders report showed funds reduced their short futures position by 244 contracts, bring their net-short position to 27,663 contracts.

	BULL SIDE		BEAR SIDE
1)	New contract highs in the cattle complex and funds increasing their net-long positions show the strength of this market.	1)	All cattle contracts have chart gaps below the market that will be filled at some point with June and August now having two gaps to fill.
2)	Feedlots will be looking for higher cash this week as they are pulling cattle forward and weights are lighter.	2)	Beef packer margins have declined significantly over the last two weeks. Packers may slow slaughter, attempting to improve those margins.
3)	Packers may be more aggressive this week with purchasing hogs as they were light on purchases last week.	3)	June hogs made a new contract low again as fundamentals have not provided solid support.
4)	Cutouts may be higher as retail will replenish pork supplies after Easter demand.	4)	Packers continue to find sufficient hogs available without them having to aggressively bid for them.

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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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